With the British economy contracting for a third consecutive quarter demands for a change of tact have been increasingly persistent but Prime Minister David Cameron and Chancellor George Osborne have so far stood by their austerity measures. Cameron also continues to reject controversial expansion plans for Heathrow airport, plans which many feel would provide the flagging economy with a much needed boost.
Last week fellow conservative Tim Yeo questioned whether the Prime Minister would preside ‘over a dignified slide towards insignificance’. Yeo then proposed that Cameron should ‘ask himself whether he is man or mouse’. Another member of Cameron’s own party, David Davis, then commented on the necessity of an ‘alternative’ economic policy.
Parliament reassembles today following the summer break and on Sunday the Prime Minister retorted through a Mail on Sunday article entitled: ‘Cameron roars: I’m no mouse.’
Although a cabinet reshuffle is generally expected to take place in the coming weeks (with some even predicting Osborne’s removal) Cameron made no comment on this but instead expressed his commitment to improving the UK economic outlook.
He stated: ‘We’ve cut the deficit by a quarter already, and we are sticking to this course: rejecting the easy path; restoring sanity to our finances […] We’re on a hard road to balancing Britain’s books […] you cannot borrow your way out of a debt crisis.’
Cameron also asserted: ‘Frankly, I am frustrated by the hoops you have to jump through to get anything done – and I come back to parliament more determined than ever to cut through the dither that holds this country back’.
It appears that the next steps the government plans to take involve increasing small business lending and easing planning laws.
On Sunday Osborne also hit back at his detractors, telling the BBC ‘Our economy is healing, jobs are being created. It is taking time, but there is no easy route to a magical recovery […] We have to do more and we have to do it faster.’ The Chancellor also added that the government intended to speed up the execution of construction plans, and that legislation would be revealed next week which would allow the underwriting of infrastructure projects.
Osborne said that the government intended to utilise the ‘low interest rates we’ve earned by being tough on the deficit to help underwrite construction projects, including housing. [We will do] these things to get the economy moving, to make sure that the jobs we’re already creating in this economy continue to be created.’
Cameron and Osborne’s continuing confidence in the validity of their austerity plan has met with derision from Labour. Labour finance spokesman Chris Leslie was quoted as saying: ‘Despite a double dip recession which has pushed borrowing up by a quarter so far this year, it’s clear that George Osborne has no new ideas. The Chancellor seems desperate to cling on to his failing plan, regardless of the long term damage.’ The opposition has also cited faltering confidence and cuts to public investment as reasons for Britain’s current lack of construction.
Unfortunately for Cameron and Osborne, the latest data for the last quarter has revealed that trading conditions for British manufacturers have been the starkest seen since 2010.
Business lobby EEF conducted a survey involving 369 companies, the results of which show that stagnating demand at home and overseas is taking a toll on order books. For the first time in ten quarters responses on domestic orders turned negative, and it can’t all be attributed to effects of the euro-zone crisis.
EEF have now forecast that 2012 manufacturing output will contract by 1.5 percent and rebound by 1.5 per cent in 2013.
Many are also predicting August PMI data to reveal a fourth month of contraction. If confirmed, this data could take away any comfort investors have drawn from the news that David Cameron is not actually a mouse.
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