Cameron Says Strengthening Economy May Allow U.K. to Lower Taxes

U.K. Prime Minister David Cameron said the British economy is “healing” and that the improvement should allow the government to lower taxes.

“As we start to see the economy grow stronger -- and it is growing stronger -- as we start to see the country improve, actually I want to give people back some of their hard-earned money and try to reduce their taxes,” Cameron said in an interview on the BBC’s “Andrew Marr Show” broadcast yesterday. “Your economy does better if you say to people you’ve worked hard, you’ve done the right thing, here is some of your own money back in a tax reduction.”

With recent data showing strength in the economy, Cameron may find it easier to achieve his deficit-reduction goals as part of the biggest fiscal squeeze since World War II. Due to a weaker-than-expected recovery after the global financial crisis, Cameron’s Conservatives and their Liberal Democrat coalition partners have had to extend budget cuts until 2017-18, beyond the country’s next general election in 2015.

The government’s fiscal plans show “further need for spending reductions in order to meet our deficit targets” and “don’t include any plans for tax rises,” Cameron said.

The U.K. public has “set us this task of trying to turn the country round, sort out the deficit, get the economy moving again, build a country where hardworking people get rewarded,” Cameron said. “They’ll judge us in 2015 and I hope to persuade them that a Conservative-only government will be able to do even more of that.”

Gaining Momentum

After returning to growth in the first quarter, Britain’s economy has shown some signs of gaining momentum. Measures of services, manufacturing and construction all improved in June and recent reports have suggested rising house prices and falling unemployment are spurring consumer confidence.

Data this week will probably show gross domestic product rose 0.6 percent in the second quarter, the most since 2012, compared with 0.3 percent in the previous three months, according to the median of 37 economist forecasts in a Bloomberg News survey. The Office for National Statistics will publish the data, a first estimate, on July 25.

Cameron and Chancellor of the Exchequer George Osborne are counting on the economy gaining ground to boost support for the Conservative Party, also known as the Tories, which is trailing behind the opposition Labour Party in opinion polls.

‘Worse Off’

Cameron’s economic strategy hasn’t worked and Labour would raise the threshold at which people begin paying income tax, paid for by a mansion levy on the wealthiest, said lawmaker Catherine McKinnell, a spokeswoman for the opposition on Treasury issues.

“The Tories have given millionaires a huge tax cut, but their decisions have made people on middle and low incomes worse off,” McKinnell said in an e-mailed statement yesterday. “The reason why there’s still going to be a big deficit after the next election is this government’s economic failure. That’s why the government should be acting now to secure the recovery and help families struggling with the cost-of-living crisis.”

Cameron should break up the coalition next year so the Conservatives can campaign more clearly as a separate political party in the run-up to the general election, the Sunday Telegraph yesterday cited Conservative lawmakers Graham Brady and Bernard Jenkin as saying.

“I want to govern as a Conservative-only government,” Cameron said yesterday. “I’m aiming for victory and I’m going to fight all-out for victory, and I think victory is achievable if we really roll up our sleeves and deliver.”

Child Pornography

The prime minister will give a speech today on tackling child pornography on the Internet. He said yesterday that Internet companies need to block the results of searches for child-abuse images, and that the government will look at bringing in legal controls should they fail to comply.

“We need to have very, very strong conversations with those companies about saying ‘no, you shouldn’t provide results for some terms that are so depraved and disgusting,’” Cameron said. “If we don’t get what we need we’ll have to look at legislation.”

On the conflict in Syria, Cameron said the U.K. is sticking with plans to give only non-lethal support to rebel forces.

“I would accept that we’re on a depressing trajectory and we need to change that,” he said. “You’ve got an evil president who’s doing dreadful things to his people, I think he may be stronger than he was a few months ago, but I’d still describe the situation as a stalemate.”

EU Ties

Asked about his plans to renegotiate the U.K.’s relationship with the European Union before a proposed referendum in 2017 on Britain’s EU membership, Cameron said yesterday that more specific goals will be set out “over time.”

He is seeking to repatriate some powers and streamline decision-making as part of an overhaul of the political bloc.

“I go into these negotiations optimistic and confident that I can get a better deal for Britain,” he said. “I wouldn’t be going down this path if I didn’t think it was possible to get the result I want to achieve.”

Japan told Britain it “expects that the U.K. will maintain a strong voice and continue to play a major role in the EU,” the Sunday Times said yesterday, citing a memo to the British government as part of an official review into the current arrangement.

To contact the reporter on this story: Scott Hamilton in London at shamilton8@bloomberg.net

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

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