- Premier rejects plea to aid economy by suspending fiscal rules
- Osborne has warned more spending cuts, tax rises after Brexit
U.K. Prime Minister David Cameron rejected suggestions that the Treasury should relax its fiscal austerity to deal with the economic fallout from last week’s vote to leave the European Union.
“I don’t think it would be right to suspend the fiscal rules,” Cameron said in the House of Commons on Wednesday, when urged by opposition leader Jeremy Corbyn to do so to boost investment.
“What business needs to hear, what consumers and investors and people concerned about our economy want to hear, is that we have taken huge steps over the last six years to get the budget deficit down, to make the British economy more competitive, to make us an attractive destination for investment,” the premier told lawmakers. “They want those things to continue.”
Having already broken pledges on debt and welfare, Cameron’s government is under pressure not to relinquish its central goal -- a legally binding commitment to turn a budget deficit of 4 percent of economic output last year into a surplus by 2020. The rule only applies in “normal times,” meaning it can be abandoned if growth is projected to drop below 1 percent.
Britain saw its credit rating lowered this week and Chancellor of the Exchequer George Osborne warned that additional spending cuts and tax increases will be needed to fill a budget hole caused by Brexit. The Institute for Fiscal Studies estimates the cost to the public finances could be as high as 40 billion pounds ($54 billion).
Almost three quarters of respondents to a Bloomberg survey conducted after the Brexit vote say the economy will slip into a recession for the first time since 2009. In his comments Wednesday, Cameron said the British economy faces “choppy waters,” but from a position of strength.