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Tackling Britain’s Deficit

Submitted by on 22 Nov 2010 – 09:47

By Danny Alexander MP, Chief Secretary to the Treasury

The situation we face as a country is unprecedented. Not since the Second World War has our economy faced such a daunting challenge. The legacy we inherited from the last Government is the largest budget deficit in Europe, bar Ireland.  We are spending £150 billion more than we are receiving in tax and paying more on the interest on our debt than we spend on educating our children. That is simply not sustainable.

Therefore we need to reverse the unsustainable path we have been put on by a Labour Government more interested in spending its way out of trouble than tackling the real problems we face. The economic situation is one which we would have preferred not to have inherited, but we are the ones who will clean up the mess.

That is why we have already taken decisive action to combat our deficit – which is the largest in the G20 – and restore confidence to our economy in a fair and responsible way. Not getting to grips with the problem as some are intent on doing would have dire consequences.  We have seen in other countries what happens when there is a loss of confidence in a country’s ability to pay its way, the costs of debts shoot out of control, interest rates rise and lower growth and less employment is the result. Putting off the difficult choices now will only mean more pain in the future and we are not willing to let that happen.

It is true that the global recession contributed greatly to the situation we find ourselves in now – the financial crisis had serious repercussions for economies the world over. Yet Britain’s problems are deeper than that. Over the last 13 years, public spending in this country had been on an unsustainable upward trend.  So much so that the “structural” part of the deficit – that is the part of the deficit that doesn’t go away once the economy recovers – now makes up around 75% of the total deficit – this is no way to run a country. Balancing the books is going to mean completely re-evaluating the Government’s role in providing public services, and the way it spends taxpayer’s money.

Because of the real risks our economy faces we have already taken decisive action to deal with the problem. Within a few weeks of taking office, we reduced spending this year by £6.2 billion, reviewed all spending decisions signed off by the Treasury since 1st January to ensure they represented good value for money while the Budget set out a decisive five year plan to redress the imbalances in our economy and eliminate the structural current deficit by 2014-15 –a decision welcomed by countries and independent experts around the world.

The upcoming Spending Review will involve very difficult decisions. These decisions will support economic growth, deliver reform of public services, and seek to protect the services that matter most to the most vulnerable. Spending cuts are not an end in themselves; this coalition is committed to reforming our economy as well as how politics is done in the UK.

We can reduce our borrowing, and cut our debts, while creating the conditions for growth and jobs for the future. Those who argue deficit reduction and growth are not compatible are the ones who got us into this mess, and are on the wrong side of the economic argument. We will sort out the mess we have been left and reform the way we deliver public services – ensuring better value for money and more accountability to the British people, not more waste. Instead of unnecessary targets and top down Government, we want to see an economy driven by enterprise and a public sector delivering for the public.

If we act decisively now and accept there will be painful months ahead we can start to build a better future for our country based on fairness, responsibility and freedom.