LONDON – British Prime Minister David Cameron is expected to reject calls for a shift in economic policy and vow to maintain a course of austerity despite calls for more stimulus and an embarrassing ratings-agency downgrade.
In a key speech on the economy Thursday, Cameron will argue that the U.K. is beginning to see signs of progress thanks to his government's tough economic policy and that changing its approach risks plunging Britain "back into the abyss."
His remarks — previewed in extracts released ahead of the speech — come following a bruising set of economic developments in recent weeks.
Moody's Investor Service downgraded the U.K.'s credit rating last month, saying that sluggish economic growth would hinder the government's ability to control rising debt levels and deal with any new financial shocks. Two other ratings agencies, Fitch and Standard & Poor's, have Britain on negative outlook, signaling they too could lower the country's credit rating.
The Bank of England, too, has expressed growing concern over Britain's economy and came surprisingly close to backing another monetary stimulus in their last meeting. The central bank's next decision on interest rates is Thursday — the same day Cameron will make his case in West Yorkshire for holding firm on his government's economic policy.
"Of course the challenges are huge. And there is a long way to go. But already there are signs that our plan is beginning to work," Cameron is expected to say, citing a lower deficit, record-low interest rates and signs of a turnaround in exports as progress.
"The very moment when we're just getting some signs that we can turn our economy round and make our country a success..is the very moment to hold firm to the path we have set," he will say.
Cameron's Conservative Party and its junior coalition partner, the Liberal Democrats pledged to cut Britain's debts, which had piled up amid the global financial crisis and costly banking bailouts. The government has pushed through a grueling austerity drive, with cuts to public-sector jobs and welfare payments in attempts to reduce the deficit.
Cameron will argue that changing economic policy and borrowing more — as suggested by critics — would burden future generations and leave Britain unable to afford good public services.
"I know some people think it is being stubborn to stick to a plan. That somehow this is just about making the numbers add up....But nothing could be further from the truth," he will say. "My motives for sticking to the plan are exactly about doing the right thing to help families and business up and down the country."
The prime minister's speech will coincide with an announcement that BT is creating more than 1,000 engineering jobs at its Openreach business, with most of the recruits set to install fiber broadband in homes.