MercoPress. South Atlantic News Agency

Darling defends cautious approach to tackling budget deficit

Long way before we are of the woods says the British chancellor

Chancellor Alistair Darling has defended his approach to tackling the UK's budget deficit. Speaking to the BBC, Mr Darling said he disagreed with economists who had called for more aggressive action to close the deficit.

He said cutting spending too quickly could damage the economy, warning “we are not out of the woods yet”. The shadow chancellor, George Osborne, said economists' concerns echoed the views of the Conservatives.

A total of 20 leading economists, including former members of the Bank of England's monetary policy committee, expressed their concern about the government's plans to cut the deficit in a letter to the Sunday Times over the weekend.

They argued that the lack of a credible plan threatened to push up interest rates and undermine the recovery.

But speaking to the BBC, Mr Darling said the criticisms did not take into account the fragility that still existed in the UK and world economies.

“If anyone imagines for a moment that we are all out of the woods yet, that is simply not the case,” he said.
“My judgement is that halving the deficit over a four-year period with the structural deficit coming down by two-thirds, is the right [course of action].”

Both Labour and the Conservatives have yet to provide full details on how they plan to cut public expenditure.

In December's pre-Budget report, Labour announced belt-tightening measures including a 1% cap on public sector pay rises and an increase in National Insurance from 2011.
But in their letter, economists called for measures to start as early as this year, arguing that the government's goal should be to eliminate the structural deficit over the course of a parliament.