Any delay in tackling Britain's ballooning deficit risks undermining the country's credibility, opposition Conservatives said on Monday, drawing an electoral battle line ahead of the Labour government's March 24 budget. The Conservatives lead Labour in the opinion polls by a slim margin before an election expected to take place on May 6.
Labour, in power for 13 years, has narrowed a wide gap in those polls and says it will not choke off a fragile economic recovery by tightening fiscal policy too soon. "It will come down to honesty versus dishonesty," George Osborne, expected to become finance minister if the Conservatives win the election, told BBC radio.
"The budget can't conceal this central fact, which is the country has run out of money, and whoever forms the next government is going to have to take some very difficult decisions about spending and to be upfront about the nature of those decisions."
Labour and the Conservatives both say they are committed to tackling a budget deficit which is projected to grow to more than 12 percent of GDP this year, but disagree about the timing.
The third-biggest party, the Liberal Democrats, who could hold the balance of power if neither of the big two win an overall majority in parliament, have adopted a position similar to Labour's, leaving the Conservatives isolated. [ID:nLDE62D09X]
Two new polls on Sunday pointed to an indecisive election, with one suggesting Labour would emerge as the biggest party and the other giving the edge to the Conservatives. [ID:nLDE62D003]
The Liberal Democrats say they will shortly spell out a programme of 15 billion pounds ($22.8 billion) of cuts but would hold them back for at least 12 months.
NO DELAY
But the Conservatives have stuck to their guns.
In a joint column with U.S. economist Jeffrey Sachs, published in Monday's Financial Times, Osborne said a credible plan to re-establish sound public finances was essential.
"Without such a plan, the travails which have hit Greece … will soon enough threaten the UK, U.S. and other deficit-ridden countries," the column said.
"The general notion that delay (in cutting public spending) is beneficial in the short term because it provokes more spending today — irrespective of future debt burdens — is also wrong, in theory and in practice," it said.
The Conservatives have warned that Britain's triple-A debt rating was under threat because of government profligacy, and set themselves the target of protecting it.
Ratings agency Moody's told Reuters that Britain's rating was safe for now as all the main political parties had accepted the need to repair the public finances. [ID:nLAG006174]
"We suspect strongly that any government elected … would be ready to make adjustments to reduce the deficit," said Moody's senior vice president Kristin Lindow.
"That's behind our stable outlook, despite the extreme deterioration on the fiscal front."
Moody's stance contrasts with that of Standard & Poor's which downgraded Britain's rating outlook to negative last May.
Britain crept out of recession in the last quarter of 2009, later than most of its counterparts.
Bank of England policymaker Kate Barker said in a newspaper interview published over the weekend said that the economy could contract again for one quarter, but was unlikely to return to full-blown recession.
