Perilous
Times
Chancellor: UK has run out of money
The Government 'has run out of money' and cannot afford
debt-fuelled tax cuts or extra spending, George Osborne has
admitted.
Mr Osborne is under severe pressure to boost growth, amid signs
the economy is slipping back into a recession. Photo: PA
By Rowena Mason, Political Correspondent
10:02PM GMT 26 Feb 2012
The Telegraph UK
In a stark warning ahead of next month’s Budget, the Chancellor
said there was little the Coalition could do to stimulate the
economy.
Mr Osborne made it clear that due to the parlous state of the
public finances the best hope for economic growth was to encourage
businesses to flourish and hire more workers.
“The British Government has run out of money because all the money
was spent in the good years,” the Chancellor said. “The money and
the investment and the jobs need to come from the private sector.”
Mr Osborne’s bleak assessment echoes that of Liam Byrne, the
former chief secretary to the Treasury, who bluntly joked that
Labour had left Britain broke when he exited the Government in
2010.
He left David Laws, his successor, a one-line note saying: “Dear
Chief Secretary, I’m afraid to tell you there’s no money left”.
Mr Osborne is under severe pressure to boost growth, amid signs
the economy is slipping back into a recession.
The Institute of Fiscal Studies has urged him to consider
emergency tax cuts in the Budget to reduce the risk of a prolonged
economic slump.
But the Chancellor yesterday said he would stand firm on his
effort to balance the books by refusing to borrow money. “Any tax
cut would have to be paid for,” Mr Osborne told Sky News. “In
other words there would have to be a tax rise somewhere else or a
spending reduction.
“In other words what we are not going to do in this Budget is
borrow more money to either increase spending or cut taxes.”
The strongest suggestion of help for squeezed family budgets came
from the Chancellor’s claim that he was “very seriously and
carefully” considering plans to help lower earners by raising the
personal allowance for income tax, a proposal that has been
championed by Nick Clegg, the Deputy Prime Minister.
But he implied there would be no more help for motorists
struggling with record petrol prices this spring. “I have taken
action already this year to avoid increases in fuel duty which
were planned by the last Labour government,” he said.
The Chancellor’s tough words were echoed by Liberal Democrat
Jeremy Browne, the foreign minister, who warned that Britain faced
“accelerated decline” without measures to tackle its debt and
increase competitiveness.
In an article published today in The Daily Telegraph, he writes
that Britain’s market share in the world used to be “dominant” but
was now “in freefall” compared with the soaring economies of Asia
and South America. “This situation has been becoming more acute
for years,” he adds. “It is now staring us in the face. So we need
to take action.”
Mr Browne writes that reform of pensions, welfare and defence is
essential to stop the departments “collapsing under the weight of
their own debt”. “Just because the spending was sometimes on
worthy causes does not in itself mean it was affordable,” he says.
“Doing nothing when your prospects are at risk of declining is not
the safe option. More of the same may be superficially more
popular in the short-term but that does not make it right.”
Amid warnings that Britain urgently needed to adopt a more
pro-business outlook, senior Conservatives have urged the
Government to get rid of the 50 pence top rate of tax.
Figures from the Treasury last week suggested the policy was not
raising the expected amount of revenue and was threatening to
drive leading business people and entrepreneurs away from Britain.
Dr Liam Fox, the former Conservative Defence Secretary, yesterday
argued for the top tax rate to be scrapped, but added that cutting
taxes on employment was even more important.
“I would have thought the priority was getting the costs of
employers down and therefore I would rather have seen any
reductions in taxation on employers’ taxation rather than personal
taxation,” he told the BBC’s Sunday Politics show.
Any efforts to scrap the rate this parliament would face severe
opposition from within the Coalition.
Simon Hughes, Liberal Democrat deputy leader, said yesterday that
keeping the current 50p rate was “the right thing to do”. He told
the BBC: “I represent people in a pretty solid working-class
community. What they’re concerned about is what happens to
ordinary people out of work and where they get jobs.”
Last night, Labour argued Mr Osborne needed to take a more
proactive stance on boosting growth by increasing public spending.
Chris Leslie MP, the shadow Treasury minister, said it was wrong
of the Chancellor to argue that Britain was broke and to rely on
business alone to create economic growth.
“George Osborne can’t complacently wash his hands and claim the
lack of jobs and growth in the economy is nothing to do with him,”
he said.
“He needs to realise that government has a vital role to play in
creating an environment where the private sector can grow and
create jobs.”
Harriet Harman, Labour’s deputy leader, urged Mr Osborne to cut
VAT.
Meanwhile, the Chancellor made it clear he was resisting pressure
to hand over up to another £17.5billion in taxpayers’ money to
help bail out struggling European Union countries.
He said Europe had not “shown the colour of its money” by taking
measures to help itself tackle its debt problems.
Until that happens, Britain will not give any extra funds to the
International Monetary Fund.
The Chancellor was speaking as finance ministers from the world’s
20 most powerful economies met in Mexico.
Mr Osborne said: “While at this G20 conference there are a lot of
things to discuss; I don’t think you’re going to see any extra
resources committed (to the IMF) here because eurozone countries
have not committed additional resources themselves, and I think
that quid pro quo will be clearly established here in Mexico
City.”