October 30, 2011 4:00 pm
A three-pronged plan to revive Britain’s economy
The eurozone crisis has had a chilling effect on major economies around the world; and has added to the unprecedented pressures facing the global economy. But, in spite of the difficulties, I am confident that we can both resolve the crises at hand and come through them with an economy that is stronger and fundamentally fairer. My argument here at home and at the meeting of the Group of 20 leading economies in Cannes is that we can only do so if we show complete single-mindedness on three fronts: confronting our debts; strengthening the competitiveness of our economy; and unlocking global trade. Let me take each in turn.
First, confronting our debts. Those who still argue for an abandonment of our deficit reduction plan should reflect on the journey this country has taken. We went into the bust with the biggest structural deficit in the G7 and came out of it with a deficit forecast to be the biggest in the G20. It is thanks to the credible plan this government has set out that today we have market interest rates of just 2.5 per cent – half what they are in Spain or Italy. Earlier this month, the same credit rating agency that downgraded the US confirmed our triple A rating. This confidence has been hard-won; and it can be easily lost. As Standard & Poor’s made clear, the greatest threat to confidence would be if the coalition’s commitment to fiscal consolidation falters. Businesses, investors and families all over the country can rest assured that we will not falter. We will stay the course.
We need to see that same resolve in the eurozone. The deal forged in Brussels marked very good progress. But in the coming weeks, the vital details need to be agreed – on the reinforcement of the bail-out, the recapitalisation of European banks, and the resolution of Greek’s debt crisis. Forging a clear route forward is overwhelmingly in Britain’s national interest, which is why we will press for more progress at the G20 in Cannes.
Second, we are showing consistency of purpose on strengthening Britain’s competitiveness: raising the pension age; cutting corporation tax; reshaping the welfare system so that work pays; and in the chancellor’s autumn statement, he will set out more detail on our new programme for credit easing. In the run-up to that statement, our focus is on updating our infrastructure. This year the UK came 28th in international rankings. In terms of future productivity, this infrastructure deficit is as serious as our budget deficit. In terms of job creation today, getting construction projects off the ground is critical.
Too often projects get hobbled by planning restrictions, funding blockages or regulatory burdens. So this autumn the government is on an all-out mission to unblock the system and get projects under way. Today we give the green light to two power plants in the north of England – at Ferrybridge and Thorpe Marsh – which together will create more than 1,000 construction jobs. And we welcome another significant infrastructure project, with BT’s announcement that it will complete its roll-out of superfast broadband by the end of 2014 – meaning the recruitment of more than 500 engineers. Over this autumn you can expect to hear many more such announcements.
Finally, we are showing single-mindedness on unlocking global trade. At the G20 I’ll be making the argument that inward-looking, beggar-my-neighbour policies benefit no one. Allied to this is the argument on trade imbalances. Imbalances are growing again, and we know from recent experience how dangerous that can be. That’s why we have to push for a more balanced world economy, where countries like the UK do better at saving and investing and restoring their competitiveness, and trade surplus economies increase domestic consumption. This is a case for a stronger world economy for all – and we must not tire of making it.
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Above all, at home and abroad, we must counsel against the pessimism and fear that can become self-fulfilling prophecies in global markets. For Britain, there is much to be inspired by. Last year bilateral trade between the UK and India grew by 20 per cent. Our exports to China are up 40 per cent – and we recently signed £1.4bn of trade deals with them. Whatever the obstacles to growth today, we still boast some of the best universities in the world, the most favourable timezone in the world, and the world’s first language. I passionately believe that the global economy is presenting us with opportunities, not threats – and we must seize them.
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Take all this together and you have a coherent, long-term plan to lay solid foundations for a better future. Strong growth alone is not the goal. For too long the British economy has been characterised by unfairness and imbalance; short-term thinking and short-term gains.
Our ambition is to build a new and better economy – where opportunity, wealth and work are spread more widely; where those who work hard and play by the rules get a good deal. There will be no short-cuts to success. But this coalition has the determination to do the right thing for our country, so that we don’t just weather the international storm – but come out stronger on the other side.
.The writer is the UK prime minister
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Copyright The Financial Times Limited 2011
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