Clegg Criticizes Cuts as Britain Slides Into Recession

Deputy Prime Minister Nick Clegg of the United Kingdom delivers a press conference in Whitehall, London, January 16, 2012

Deputy Prime Minister Nick Clegg of the United Kingdom delivers a press conference in Whitehall, London, January 16, 2012 (Cabinet Office)

Britain’s deputy prime minister, Nick Clegg, questioned the government’s austerity program as the country teetered on the brink of a third recession.

“If I’m going to be sort of self-critical, there was this reduction in capital spending when we came into the coalition government,” Clegg, who leads the minority Liberal Democrats, said in an interview with The House on Thursday, a weekly political magazine.

We have all realized that you actually need, in order to foster a recovery, to try and mobilize as much public and private capital into infrastructure as possible.

Growth figures published on Friday revealed that British gross domestic product had declined .3 percent in the fourth and final quarter of last year, more than the .1 percent contraction that had been forecast by analysts.

Britain’s economy is still 3.3 percent smaller than during the first quarter of 2008, before the financial crisis plunged the country into recession with much of the developed world with it. Its recovery has been far more lackluster than most other industrialized nations’. It slipped back into recession in the last three months of 2011 and could very well again in the first quarter of the new year.

The coalition government, in which Prime Minister David Cameron’s Conservative Party is the senior partner, made reducing Britain’s budget shortfall, which hit a record 11.2 percent of GDP before the 2010 election, its priority. Disappointing economic output has forced it to set back its fiscal targets by two years. The national debt as a percentage of GDP is not expected to fall before the next election, rather by the 2016-2017 financial year.

Declining approval ratings, which have hit the Liberal Democrats especially hard as centrist and left-wing voters defected to Labour, put further pressure on the coalition. Chancellor of the Exchequer George Osborne insists that the government must stay the course. “To turn back now would be a complete disaster,” he told the BBC last month.

Infrastructure investments to stimulate economic activity, as championed by Labour and mentioned by Clegg on Thursday “would take us back to the problems that [Labour] created in the first place,” he argued.

Despite the opposition’s and Clegg’s criticism of budget cuts, spending in real terms hasn’t actually been reduced. Total public-sector spending was almost 4 percent higher in 2011 than in 2009, Labour’s final full year in power. Borrowing last year was higher than in the year before. By the time of the next election, scheduled for 2015, the Treasury expects to spend £756 billion compared with £683 billion last year.

The liberal-conservative coalition is further tested by Cameron’s plan to call a referendum on Britain’s membership of the European Union after the next election, announced on Wednesday. The Conservatives, coping with Euroskeptics within their own ranks and opposition from the right-wing United Kingdom Independence Party, seek renegotiated terms of membership while the Liberal Democrats favor deeper economic and political integration with the countries on the continent. The liberals previously suffered defeat in a referendum on electoral reform in 2011 that would have given their party a better chance of winning more seats in Parliament.