Bloomberg News

U.K. Must Bring Forward Spending to Spur Growth, Huhne Says

September 21, 2011

(Updates with Alexander comments starting in fifth paragraph.)

Sept. 21 (Bloomberg) -- U.K. Energy Secretary Chris Huhne said the government should speed up capital spending to help the economy, after the International Monetary Fund said ministers may need to consider delaying some of their fiscal squeeze.

“We’ve got to be creative and imaginative about bringing forward more spending,” Huhne told a fringe event last night at his Liberal Democrat party’s annual conference in Birmingham, central England. He said the option of “pump-priming” the economy by increasing expenditure is “blocked off to us” because of “the scale of our budget deficit.”

Deputy Prime Minister Nick Clegg, the Liberal Democrat leader, said Sept. 14 the government was going to “unblock” 40 infrastructure projects in an effort to spur growth. He said the government wanted to “put its foot on the accelerator.”

BBC television reported yesterday evening that ministers were discussing increasing spending on projects such as roads, rail and broadband by as much as 5 billion pounds ($8 billion), without saying where it got its information. The Treasury denied the report.

“I don’t recognize the numbers involved or the process as described,” the Liberal Democrat chief secretary to the Treasury, Danny Alexander, said in an interview with BBC Radio 4’s “Today” show this morning. “We’re not changing our spending plans.”

‘Stick to Our Plans’

Alexander said the message he had taken from the IMF report yesterday “is we should stick to our plans.”

U.K. gross domestic product will rise 1.1 percent this year and 1.6 percent in 2012, the Washington-based fund said in its World Economic Outlook, cutting previous projections of 1.5 percent and 2.3 percent respectively.

“What we need to have across the world is countries taking action that’s appropriate to their own circumstances to deal with the problems that they face,” Alexander said. “We have a great asset; we have clear spending plans and we’re sticking to them.”

Liberal Democrat Business Secretary Vince Cable has already urged the Bank of England to expand its program of bond purchases to help boost growth. He told a separate fringe event in Birmingham that “there are ways in which you can stimulate an economy without disrupting your fiscal discipline.”

“We don’t think it’s time to change tack at the moment,” Cable said. “We have two strands to policy, one is deficit reduction and we must stick to that for policy credibility. The other is a growth strategy and we should stick with that too. There’s already flexibility built into the plans.”

The fiscal target the government is working to “is the structural current balance,” Huhne said. “It is current not capital spending. That is an important distinction.”

--Editors: Eddie Buckle, Alan Crawford.

To contact the reporters on this story: Robert Hutton in Birmingham, England, at rhutton1@bloomberg.net; Thomas Penny in Birmingham, England, at tpenny@bloomberg.net

To contact the editor responsible for this story: James Hertling at jhertling@bloomberg.net.


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