Deputy Prime Minister Nick Clegg said the U.K. government can and will “do more” to create growth as Cabinet members and Bank of England policy makers discussed options to stimulate the economy.
Bank of England officials said this month an expansion of their 200 billion-pound ($314 billion) bond-purchase program is “increasingly probable,” minutes showed today. At the annual conference of Clegg’s Liberal Democrat party in Birmingham, central England, Energy Secretary Chris Huhne said the government should speed up capital spending and Business Secretary Vince Cable repeated a call for the central bank to expand quantitative easing beyond purchases of government debt.
The International Monetary Fund lowered U.K. growth forecasts yesterday and said the government may need to consider delaying some of its measures to narrow the budget deficit. Britain is facing the fifth-largest fiscal squeeze among advanced economies to 2015, according to IMF data analysed by the London-based Institute for Fiscal Studies. Only Greece, Ireland, Portugal and Iceland are on course to see deeper cuts.
“It is clearer now than ever that deficit reduction was essential to protect the economy, to protect homes and jobs,” Clegg said in his closing speech to the Liberal Democrat conference. “But the outlook for the global economy has got worse. So we need to do more, we can do more, and we will do more for growth and for jobs.”
‘Foot on the Accelerator’
Clegg said Sept. 14 the government was going to “unblock” 40 infrastructure projects in an effort to spur growth. He said the coalition wanted to “put its foot on the accelerator.”
The Treasury denied a BBC television report yesterday evening that ministers were discussing increasing spending on projects such as roads, rail and broadband by as much as 5 billion pounds ($8 billion). Government figures today showed the deficit between April and July was 4.6 billion pounds less than previously estimated, giving Osborne room for maneuver should he wish to add stimulus.
While comments yesterday from Huhne that “we’ve got to be creative and imaginative about bringing forward more spending” gave substance to the BBC story, other Liberal Democrats in the Cabinet dismissed it.
“I don’t know where that figure of 5 billion came from, we’re not discussing changes of that kind,” Cable told Sky News television. The chief secretary to the Treasury, Danny Alexander, said he didn’t “recognize the numbers involved or the process as described.” He told BBC Radio 4’s “Today” show this morning: “We’re not changing our spending plans.”
U.K. gross domestic product will rise 1.1 percent this year and 1.6 percent in 2012, the Washington-based IMF said in its World Economic Outlook, cutting previous projections of 1.5 percent and 2.3 percent respectively. U.K. consumer confidence fell to a four-month low in August as Britons grew more pessimistic about the outlook for the economy, Nationwide Building Society said today.
Minutes of the Bank of England’s Sept. 7-8 Monetary Policy Committee meeting showed the panel voted 8-1 to maintain the current size of its bond plan and were unanimous in keeping the benchmark rate at a record low of 0.5 percent. Even so, most policy makers said it was “increasingly probable that further asset purchases to loosen monetary conditions would become warranted at some point,” according to the minutes.
Britain had its biggest budget deficit for any August since modern records began in 1993, the Office for National Statistics said in London today, as government spending jumped and income-tax receipts declined. The shortfall of 15.9 billion pounds, which excludes government support for banks, compared with 14 billion pounds a year earlier.
The Liberal Democrats have seen their poll ratings slump since they joined the coalition government in May 2010, helping David Cameron’s Conservatives to set in train the biggest fiscal squeeze since World War II, and breaking pledges made during the election, including one not to vote for increased university fees. Attempting to rally his supporters, Clegg told them that the costs had been worth it for the opportunity of being in government for the first time in decades. He repeated the refrain that the decisions had been “not easy, but right.”
Clegg referred to an idea he first floated in June of sharing with taxpayers any windfall from the sale of banks nationalized during 2008, when the government injected more than 20 billion pounds into Lloyds Banking Group Plc and 45.5 billion pounds in Royal Bank of Scotland Group Plc. Without giving any detail, he said that “when we come to sell those shares, I want to see a payback to British citizens.”