This article titled “Miliband confronts Cameron on pledge to get national debt falling by 2015″ was written by Patrick Wintour, political editor, for The Guardian on Wednesday 12th September 2012 20.03 UTC
David Cameron rejected three challenges from Ed Miliband to promise that he would meet his own government’s target to ensure debt is falling as a proportion of GDP by the end of the current parliament in 2015-16.
The target is likely to be abandoned in the autumn statement to be delivered on 5 December unless government borrowing figures suddenly improve. Such a reversal would be deeply embarrassing for the Treasury although it did not appear to shock the City, or point to a rise in government borrowing costs.
At prime minister’s questions Miliband asked: “We gather today that the government might miss the overriding economic test he set himself, which is that debt will be falling at the time of the next election. Is it not a fact that he is failing the very test he set himself, and is that not the surest sign yet that his plan is just not working?”
The Labour leader challenged Cameron a second time to say if the reports, including one in the Guardian, were true and continued: “The reality is that he is failing the tests he set himself, and it shows that plan A is not working.” He then tried a third time but Cameron sidestepped the issue, replying: “It is this government who have cut the deficit we inherited by a quarter. That is what we have done in two years.”
Rachel Reeves, shadow chief secretary to the Treasury, responding to the prime minister’s answers, said: “It’s very revealing that Cameron repeatedly refused to say that the government will meet its target to get national debt falling by the time of the next election.
“The reason why the government has already broken its pledge to balance the books by 2015, and now also risk missing their debt target, is because its economic plan has failed. As we warned, the government’s policies have proved to be self-defeating with the double-dip recession leading to borrowing going up by a quarter so far this year.”
City analysts, notably Citi Research, have been predicting that George Osborne will not meet his target of a fall in debt in relation to growth, citing unexpected fall in corporate profits, including profits of financial companies, so reducing tax receipts, and boosting borrowing.
Jonathan Portes, director of thinktank the National Institute of Economic and Social Research and a critic of Treasury policy, said abandonment of the debt target should be welcomed. But he added: “Without the debt target, the central element of the fiscal framework – the deficit reduction target – is no longer credible.”
The deficit reduction target commits the government to eliminate cyclically adjusted current balance by the end of a rolling, five-year forecast period.
Portes argues this deficit target is valueless without the debt target set for 2015-16: “The forward-looking deficit target on its own is no more credible than saying ‘I’ll give up drinking next month’; and, when you ask me next month how it’s going, telling you the same thing.”
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