Dear Ian,
This morning, the Office for Budget Responsibility – an office established by this Government – published its first assessment of the public finances. Regrettably the problems facing our country are even more serious than we had originally realised.
We and many others have been warning for some time that the growth forecast in the March Budget was optimistic. The Office for Budget Responsibility confirms this. And because trend growth is lower than expected, the structural deficit is larger than anyone realised. In 2010/11 it’s going to be 8% of GDP – that’s £118bn; £11 billion more than Labour told us, rising to £13 billion next year. So the scale of the problem is even bigger than we thought.
The OBR’s independent analysis paints a stark picture. We are now facing the highest budget deficit in Europe, the highest deficit in the G20. Government borrowing this year will be ten and a half per cent of GDP, with debt topping 60%. As we always suspected, and as confirmed by this report, the downturn did more damage to the economy than Labour admitted. This is the reality that confronts us.
Labour’s approach is clear: deny the problem, play games with the numbers, and promise money we don’t have.
We have always said that we would not shrink from this task. There are tough choices to be made, but we will make them now while we can do so in a way that is both fair and just. This government, Liberal Democrats and Conservatives together, will see through the deficit reduction that is an absolute prerequisite for turning Britain’s fortunes around.
Make no mistake: this is not a task we relish. Nor was it our choice. This is the legacy that we, as a new government, and we, the British people, were left. It is the only way we can get our public finances on a sound footing. To do anything else would not only be irresponsible; it would be a betrayal of our progressive values. There is nothing progressive about denial. And there is nothing progressive about condemning ourselves and our children to decades of debt, higher interest rates and fewer jobs.
We must deal with this problem now so we don’t leave our children to pay the price later.
Best wishes,
