March 11 (Bloomberg) -- Prime Minister David Cameron’s strategy to get the U.K. economy growing was challenged by his Liberal Democrat business secretary, Vince Cable, and by a fellow Conservative, former Defense Secretary Liam Fox.
Cable suggested today the government could take advantage of low interest rates by borrowing to fund increased capital spending. In a speech in London, Fox was due to call for a freeze on all government expenditure to pay for tax cuts, according to the BBC. Chancellor of the Exchequer George Osborne will present his budget on March 20.
“The priority has now to be to get the economy going,” Cable told BBC Radio 4’s “Today” program. “Once the economy does get going, you generate more tax revenue, there are less people dependent on public spending, and the budget then tends to improve itself.”
The economy shrank 0.3 percent in the final quarter of 2012, leaving it on the brink of a triple-dip recession. The opposition Labour Party, under leader Ed Miliband, argues that the lack of growth is the result of Osborne’s austerity program. Moody’s Investors Service cut the U.K.’s top credit rating last month, citing the weak growth outlook.
Osborne and Cameron have argued since 2010 that any deviation from their strategy would lead to higher interest rates, further harming the economy. While Cable defended the decision of the coalition government in 2010 to emphasize austerity and deficit reduction, he said the question is whether the “balance of risks has changed.”
A survey by polling company Opinium Research LLP for the Observer newspaper yesterday found 58 percent of voters believe the austerity program is damaging the economy, against 20 percent who think it is the correct course. Opinium questioned 1,950 voters from March 5 to March 7 and weighted the replies to represent national opinion.
The business secretary, who is fighting to defend his budget from more cuts, criticized Cameron’s strategy of “ring-fencing” and thus protecting from cuts certain areas of spending, including health and overseas aid.
“The problem about ring-fencing as an overall approach to policy, is that when you have 80 percent of all government spending that’s ring-fenced, it means all future pressures then come on things like the army, the police, local government, skills and universities,” Cable said. “As a long-term approach to government spending, it isn’t very sensible.”
Fox was due to use his speech in London to call for general spending cuts.
“Sustained lower spending and a more sensible and consistent tax approach is a start on the path to creating a society that is sustainable for the future in the way that our current welfare-dependent and debt-ridden economy is not,” the former defense secretary wrote in the Sunday Times yesterday.
Cameron hasn’t been short of advice on government strategy recently. In a speech two days ago to a conference organized by the Tory-supporting ConservativeHome website, Home Secretary Theresa May opened with an allusion to reports she was a possible challenger to Cameron. The Tories are consistently trailing Labour by about 10 percentage points in national polls.
“Today’s event is all about a choice of leadership -- between David Cameron and Ed Miliband,” she said. While she twice more said Cameron would lead the Conservatives into the next election, her speech ranged far from her policy brief, covering public services, industrial strategy, banking and business regulation as well as crime and security.
Her proposals for what the Conservatives should offer at the next election included tax cuts for small businesses, looking at whether to leave the European Convention on Human Rights, and allowing charities and businesses to provide more services such as health and education than they already do, and to make a profit from doing it.
Tory lawmaker Eleanor Laing told the BBC there was talk within the Conservatives of replacing Cameron. “There are some people who are clearly positioning for what might happen after the next general election and there are some people who are openly talking about challenges to the leadership,” she said today. “They should all be quiet.”
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