PM: We'll Come Through If We Hold Firm

By Jon Craig, Chief Political Correspondent

David Cameron has rejected calls for a U-turn on spending cuts and vowed he is "sticking to the plan" on the economy.

In a major economic speech in West Yorkshire, the Prime Minister insisted it is the right policy for jobs, good public services, and looking after people in their old age.

But his defiant message risked being undermined by Lib Dem Business Secretary Vince Cable, who opened up a Cabinet rift by calling for more borrowing to fund capital spending.

Labour seized on Mr Cable's intervention, in an article for the New Statesman, as proof that he "may at last be seeing sense" but said his failure to influence the Tories meant he was in office but not in power.

Mr Cameron argued that those who "falter" would plunge the UK "back into the abyss" just at a time when there were signs the Government's plan was starting to work.

The PM said: "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 with no care whatsoever for what it means for people affected by the changes we make.

"But nothing could be further from the truth. My motives for sticking to the plan are exactly about doing the right thing to help families and business up and down the country."

Mr Cameron's visit to West Yorkshire coincided with an announcement by BT that it is creating more than 1,000 engineering jobs in its Openreach business.

Mr Cameron says he is doing the right things to reduce the dole queue

He argued that changing course and borrowing more would burden future generations with debt and leave Britain unable to afford good public services.

He claimed "squandering billions on welfare for people who could work" would leave the nation unable to look after people in their old age.

"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," he said.

"The biggest deficit in peacetime history is already down by a quarter, interest rates are at a record low. Exports are starting to turn around too.

"Of course, these signs of progress are just the beginning of a long hard road to a better Britain," he will add.

"But 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.

"And yes the path ahead is tough but be in no doubt, the decisions we make now will set the course of our economic future for years to come.

"And while some would falter and plunge us back into the abyss we will stick to the course."

Mr Cable's article, ahead of a speech in the City, suggested that it was time to ask whether the "balance of risk" had changed since 2010 when Chancellor George Osborne made deficit reduction the keystone of his fiscal policy in order to maintain market confidence in Britain's ability to pay its way.

Vince Cable's suggestion about more borrowing is off message

He said the £5bn boost for infrastructure investment announced last year was a "modest" sum and had so far had "little effect" on domestic demand.

He went on to ask "whether the Government should ... borrow more, at current very low interest rates, in order to finance more capital spending: building of schools and colleges; small road and rail projects; more prudential borrowing by councils for house-building".

On Thursday, he played down the suggestion that his comments indicated a change in policy - insisting it was just what he has long called "Plan A-plus".

"That is financial discipline and getting down the deficit and at the same time pursuing growth. That's what we are doing and will continue to do," he said.

Nick Clegg, speaking during his LBC radio phone-in, also stressed that Mr Cable was not calling for the Government to "borrow pots of money tomorrow".

"He is saying this is where the balance of judgment is. This is where we need to balance the risks," he said.

"The risk ... is that unwittingly, of course, you then make it more difficult for everyone else because interest rates might then go up."

"I am afraid there is no cost-free, magic-wand solution to this. We all want more money into capital, the debate is how do you find that money."

Labour Treasury spokesman Chris Leslie said: "Now is the right time to bring forward infrastructure investment and build thousands more affordable homes. It would kick-start our flatlining economy, create jobs and in the long-term strengthen our economy and help get the deficit down.

"Labour, business groups and even the IMF have spent the last two years making the case for this. If Vince Cable is finally coming round to that view, he needs to start winning the argument round the Cabinet table."

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