No change on economic policy says Cameron

In a defiant speech intended as part of the coalition’s build up to the Budget in less than a fortnight, Mr Cameron warned that changing direction now would plunge the UK “back into the abyss”.

His speech in West Yorkshire came as pressure mounted in his own party for more tax cuts to boost the economy, with reports that senior backbenchers and a cabinet minister had attended a dinner where a leadership challenge to the Prime Minister was discussed.

Meanwhile, Lib Dem Business Secretary Vince Cable underlined growing splits within the coalition when he came out in favour of the Labour Party’s call for the UK to borrow more to kickstart growth.

Echoing the words of Margaret Thatcher, Mr Cameron claimed there is “no alternative” to “sticking to the plan” on the economy.

The Prime Minister was described as “obstinate” by Labour who pointed out that the International Monetary Fund (IMF), Tory London Mayor Boris Johnson and Mr Cable have all called for a change of plan.

But Mr Cameron mocked Labour, saying: “There are some people who think we don’t have to take all these tough decisions to deal with our debts. They say that our focus on deficit reduction is damaging growth, and what we need to do is to spend more and borrow more.

“It’s as if they think there’s some magic money tree. Well let me tell you a plain truth: there isn’t.”

He went on: “I know some people think it is somehow stubborn to stick to a plan. That somehow this is just about making numbers add up without a proper care for what it means for people affected by the changes we make.

“As far as I’m concerned nothing could be further from the truth. My motives, my beliefs, my passion for sticking to the plan are exactly about doing the right thing to help families and to help businesses up and down the country.”

Mr Cameron also took on the allegation that his party was making the poor pay the most in the austerity measures by slashing welfare and cutting the top rate of income tax for those earning £150,000 or more from 50p to 45p.

He said: “The richest 20 per cent are making the greatest contribution to the deficit reduction and paying the most.

“And in every single year of this Parliament the richest - the top 1 per cent - will pay a greater share of our nation’s tax revenues than in any one of the 13 years of the last government.

“As important as being fair, it is also pro-growth.”

He said he understood people were going through economic pain but he insisted his motive for sticking to the plan was to help them.

“My motives for sticking to the plan are exactly about doing the right thing to help families and business up and down the country.

“We are making tough choices about our future. But we are making the right choices. If there was another way, an easier way, I would take it. But there is no alternative.”

Labour shadow Chancellor Ed Balls said that people in the country will think Mr Cameron is on a different planet.

He said: “This defensive speech cannot mask the total failure of this government’s economic plan and growing divisions in a Cabinet which is now openly debating the need for a change of direction. But all David Cameron can offer to struggling families, pensioners and businesses is more of the same failing policies and a tax cut for millionaires.

“We need a bold and radical Budget to kick-start the economy and help people struggling with the rising cost of living. That means boosting infrastructure investment, building more affordable homes and a bank bonus tax to fund jobs for young people out of work. And it means tax cuts for millions on middle and modest incomes by introducing a new lower 10p starting rate of tax.

“Britain cannot afford another two years of falling living standards and economic failure. If David Cameron and his downgraded Chancellor won’t listen to Labour then it’s time they started listening to the IMF, Boris Johnson and now even Vince Cable who are calling for a change of course.”

Mr Balls appeared to have some support from the government in an article by Mr Cable who suggested the government should borrow more to boost growth.

TUC General Secretary Frances O’Grady said: “David Cameron has some cheek to claim that the government’s economic policies are good for families. The truth is that those on low and middle incomes have suffered the biggest fall in their living standards for decades and there is little prospect of that getting any better.

“We have a jobs, growth and living standards crisis. Fixing that is the way to reduce debt – not the economic equivalent of self-harm.”

But amid claims that a group of Tory MPs are attempting to push for a leadership challenge against Mr Cameron, there was pressure for him to take a more rightwing approach by slashing taxes.

There were reports yesterday that leading rightwingers David Davis, Liam Fox and John Redwood were all present for the ‘dinner table plot’ which was also attended by Justice Secretary Chris Grayling.

All of them are known to want the government to take a radical change of direction with a tax cutting agenda.

The TaxPayers’ Alliance said that tax cuts will help spending in shops.

Matthew Sinclair, Chief Executive of the TaxPayers’ Alliance (TPA), said: “The Prime Minister is absolutely right that easing the heavy burden of taxes is the best way to help families struggling to make ends meet. But he needs to do more than talk about the need for low taxes. He should ease the enormous pressure on people’s budgets by cutting taxes which depress their wages and increase the prices they pay at the shops.

“If staying the course means pressing on with a vain attempt to raise enough taxes to finance a public sector spending nearly half our national income, it will just mean going down with a sinking ship. The Government should be fiscally responsible, but our deficit is a result of politicians spending too much, not taxpayers paying too little.”