March 11 (Bloomberg) -- U.K. Prime Minister David Cameron rebuffed a call by his Liberal Democrat business secretary, Vince Cable, to loosen the government’s austerity program to spur economic growth.
“We have the benefits of low interest rates, but we won’t continue with the benefits of low interest rates unless we continually demonstrate how we are going to get on top of the deficit and stick to the plans we have set out,” Cameron told an audience of apprentices today at a Mercedes-Benz training center in Milton Keynes, central England.
With Chancellor of the Exchequer George Osborne set to present his next budget on March 20, Cameron is facing calls from both the Liberal Democrats and his own Conservative Party to do more to prevent an unprecedented triple-dip recession.
Tory former Defense Secretary Liam Fox today advocated tax cut to be paid for by a freeze in government spending. Cable earlier suggested taking advantage of low interest rates by borrowing to fund increased capital spending. Cameron said the U.K. is already doing that.
“Obviously those low interest rates and the strength of the balance sheet of our country gives us the ability to make sure we can have additional capital investment,” he said. “We have done that in lots of ways. We have offered Treasury guarantees to big infrastructure schemes -- no government has been able to do that before.”
Britain’s 10-year borrowing cost of about 2 percent is about half the level when Cameron took office. Two-year gilts yield about 0.2 percent.
The economy shrank 0.3 percent in the final quarter of 2012, leaving it on the brink of its third recession since 2008. The opposition Labour Party, under leader Ed Miliband, argues that the lack of growth is the result of Osborne’s austerity program.
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.”
“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.”
Asked about Fox’s suggestion, Cameron joked today that one of the advantages to being premier is that he receives suggestions “from many quarters.”
“As prime minister I am never short of advice,” he said. “But there is one piece of advice I won’t take and that is the piece of advice that says you must cut the NHS budget,” he said, referring to the state-run health service.
While the premier chose to reiterate that pledge, he made no such promise about other areas of government spending that are currently protected from cuts, such as international aid, schools and benefits for the elderly.
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.
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.”
A Conservative junior business minister, David Willetts, told BBC television’s “Daily Politics” show that Cameron’s program was more aggressive than those of former Tory Prime Minister Margaret Thatcher, a triple election winner.
“We are more ambitious than Mrs. Thatcher tried in the early 80s, and that is the plan and that is what we are sticking to,” he said.
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.
Nick Clegg, the Liberal Democrat deputy prime minister, yesterday used a speech to his party’s spring rally to exploit tensions within the Tory party, mocking it as “like a kind of broken shopping trolley. Every time you try and push them straight ahead they veer off to the right-hand side.”
Responding today, Cameron denied he would move off the center ground of British politics.
“I find with my own shopping trolley, once I put my own daughter in there that it steers a pretty straight path and that’s exactly what I will be doing as prime minister and leader of this coalition government.”
Cable also said today he may side with the opposition Labour Party in a non-binding vote in the House of Commons tomorrow calling for a tax on the most expensive houses, a flagship Liberal Democrat policy opposed by Cameron’s Tories.
Cameron’s spokesman, Jean-Christophe Gray, said the premier had spoken to Clegg about the vote. “The prime minister will expect, as always, government ministers to support the government,” Gray said.
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