26th January 2010

We Had a Plan for the Recession and We Have a Plan for Recovery.

Issue
The latest figures show that the UK economy has returned to growth.

Key points

  • It was right to support families and the economy - sustaining jobs by giving businesses time to pay; introducing a scrappage scheme for cars and stepping up help for people to stay in their homes and find new work.

  • We need to continue supporting the economy to strengthen the recovery and take the actions necessary to promote growth and jobs. We have been clear, we will halve the deficit over four years, but it would be a huge mistake to cut support while the economy is still recovering.

  • All 186 countries at the IMF meetings in Istanbul last autumn agreed that it was too early to withdraw support for their economies.

  • The Head of the IMF said only last week, "if you exit too early [from the stimulus steps], then you'll have the risk of going back into recession," (Dominique Strauss-Kahn, 18 January 2010, Wall Street Journal).

  • Significant uncertainties in the global economy remain (e.g. commodity prices). But in terms of what counts for families and businesses, clear signs pointing to recovery:

  • Unemployment, including youth unemployment, fell last month - Government has invested £5 billion in supporting jobs. UK 's 7.8 per cent unemployment compares with 10 per cent in US and Euro-area.
  • Home repossessions lower than forecast.
  • Business insolvencies much lower than in previous recessions - schemes such as Time To Pay (tax deferral) benefiting 150,000 firms.

  • Today's growth estimate underlines how dangerous it would be to throw caution to the wind, as the Tories propose, and make deep cuts now. As recently as yesterday David Cameron called for us to 'tear up the spending plans announced for 2010' in order to cut support to the economy right away. Their reckless approach would wreck the recovery and shows how much the Tories remain a risk to families and businesses.

  • The Tories have been unable to spell out their spending plans. They admit they cannot tell us what they would spend in four months, much less four years. They say they want to cut the deficit 'further and faster'. If they halved it just one year faster than we are proposing they would need to explain how they find another £26 billion - the equivalent of raising VAT to 23 per cent.

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