UK is mired in 'significant debt' and bumpy road awaits, says Mandelson

THE UK is now in "significant debt" despite unprecedented government intervention pulling a spiralling private economy "back from the brink", Lord Mandelson said last night.

The Business Secretary told business and City leaders that the economic road ahead was certain to be "bumpy", but added that the worst predictions about where the credit crisis would leave the UK had not been realised.

In a speech in the City of London, Lord Mandelson said: "A year ago I stood here and said that I believed that the Britain that emerges from the credit crunch would be a different country.

"For one thing – although this is not what I had in mind – we are a country now unavoidably in significant debt. How we respond to that fact has been the source of some debate, and some rather poor argument.

"But more fundamentally, what I argued a year ago was that we needed to recognise that the crisis, like all crises, reveals both what is strong and what is weak in our foundations, and we should not waste the crisis by failing to tackle the weaknesses."

Lord Mandelson adds: "I applaud those who have made sacrifices. They are the true heroes of the recession."

Philip Hammond, shadow chief secretary to the Treasury, said: "Peter Mandelson's speech shows that Labour do not understand basic economics.

"He said that Gordon Brown's record borrowing wouldn't push up the interest rates on government debt but international markets have proved him dead wrong.

"This is why we need change so that a Conservative government can start getting to grips with our debts and help keep mortgage rates lower for longer."