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Clegg Says U.K. to Continue Fiscal Squeeze Amid Recession Threat

Deputy Prime Minister Nick Clegg said the coalition government will stick to plans for the biggest fiscal squeeze since World War II even after the U.K. economy contracted in the fourth quarter.

“We’re absolutely not going to change course in paying off one of the world’s largest budget deficits,” Clegg said in an interview with the BBC yesterday. Even with bright spots such as record employment, the U.K. faces “a long, hard road. There are other parts of the economy that will take longer to fix.”

The economy shrank 0.3 percent in the fourth quarter, putting the U.K. on the brink of an unprecedented triple-dip recession, data published Jan. 25 showed. Clegg, who leads the minority Liberal Democrat party, also said Prime Minister David Cameron’s proposal to hold a referendum on Britain’s membership in the European Union may jeopardize growth.

“It’s not in the national interest when we have this fragile recovery and a very open economy which is very dependent on investors” in industries such as car manufacturing, Clegg said. “Stability is crucial to any economy recovering from the shock that we endured in 2008.”

Cameron pledged in a speech last week to put the question of the U.K.’s role in the EU to a popular vote by the end of 2017, though he wants Britain to remain in the EU. He said in an interview Jan. 24 the political uncertainty surrounding the debate won’t undermine foreign investment.

Conservative Support

Support for Cameron’s Conservative party rose 5 points to 33 percent after his Jan. 23 speech, while the opposition Labour party held at 39 percent, according to a ComRes opinion poll for the Independent on Sunday and Sunday Mirror. Support for the Liberal Democrats has increased 2 points to 11 percent, while the U.K. Independence Party, which campaigns for an exit from the EU, dropped 4 points to 10 percent.

Cameron has “put party before country,” Labour leader Ed Miliband said in an interview with the Sunday Times newspaper yesterday. The premier adopted his position because of “pressure in the Conservative party and he’s worried about UKIP.”

The build-up to his speech was also “bad for the national interest” while the economy faltered, he said. A survey for the paper showed 53 percent believe Labour is wrong to oppose the vote. YouGov polled 1,943 adults Jan. 24-25.

Efforts to help the economy “grow out of this crisis” include construction of a new high-speed rail line, Clegg told the BBC. “You can be very tough on the deficit and restlessly creative on how you do things to make the economy grow,” he said. The government approved the project, which connects London to Northern England via Birmingham, in January 2012.

Fiscal Insistence

Ed Balls, who speaks for the Labour party on economic matters, said in an interview with the Independent on Sunday yesterday that the government’s insistence on its fiscal plan is “economically catastrophic.”

Cameron’s leadership of the Conservative party will be contested by Adam Afriyie were he to lose the next general election, the Sunday Times reported yesterday, citing an unidentified friend of the member of parliament. The self-made millionaire has an eight-member campaign team and his push to replace the premier has been under way for at least three months, the newspaper said.

Chris Heaton-Harris, a former member of the European parliament, and MPs Jesse Norman and Graham Brady, are also preparing campaigns, the paper said.

To contact the reporter on this story: Jennifer Ryan in London at jryan13@bloomberg.net

To contact the editor responsible for this story: Craig Stirling at cstirling1@bloomberg.net

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