Saturday, October 16, 2010

Comprehensive Spending Review

“There is a hard road to recovery ahead, but we are determined to ensure it is a road that leads to fairness too.”

We are taking action to cut the deficit because we have to. Last year, one in every four pounds the government spent was borrowed. That’s not how you’d run a home, and it’s not how you should run a government. It won’t be easy, but it’s the right thing to do, and is in our long term national interest.

The least progressive thing of all would be to burden future generations with the debts that Labour left us. Instead the choices we make will invest in their future - to give everyone the opportunity for a fair start in life regardless, of their background.

Even in the toughest of times, the right thing to do is to invest in the future. This is how we will carry out Britain’s unavoidable spending cuts: in a way that brings the country together and makes it stronger.

  • These are Labour’s cuts:
    • Gordon Brown and the Labour party’s parting gift was the largest structural deficit in the G20.
    • In 2009-10, one pound in every four of Government spending was borrowed.
    • Furthermore, we’re spending more money on the interest on our debt, £120 million per day, than on many key public services- more than on transport or law and order
  • Delayed pain would be greater pain for longer:
    • If we did not take action, interest rates would inevitably rise. That would push up debt interest payments, mortgage payments and damage growth.
    • Delaying the implementation of fiscal consolidation, as Labour proposed, prolongs the adjustment and so requires further action – through tax rises or spending reductions – to offset higher debt interest costs. Labour’s plan means greater pain for longer.
    • Since the General Election market interest rates (10yr Gilt) have fallen by 0.94%.
  • In support of our actions:
    • The OECD described the Budget as a “courageous move”, saying that “It provides the necessary degree of fiscal consolidation over the coming years to restore public finances to a sustainable path, while still supporting the recovery.
    • The Governor of the Bank of England stated that the Budget had “reduced downside risks... through removing the possibility of a sharper downturn in output resulting from higher long-term interest rates”
    • The IMF said: “The government's strong and credible multi-year fiscal deficit reduction plan is essential to ensure debt sustainability.”
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