Obama refuses to endorse Cameron’s deficit plan

US president emphasises the need for investment and says that “every country is different”.

The Tories were desperate for Barack Obama to endorse the coalition's deficit reduction plan, but at today's press conference he didn't even come close. In response to a question on the subject from ITV's Tom Bradby, the US president emphasised that "every country is different" and praised the way that "concerted action" by the UK and the US had "yanked the world economy out of recession" – an implicit endorsement of the last Labour government's fiscal stimulus.

Obama, who noted in his introductory remarks that the pair come from "different political traditions", went on to stress the need to sustain investment in "education, science, technology and infrastructure". For the US president, unlike the coalition, economic growth is a precondition of deficit reduction, not a hoped-for outcome.

It was only towards the end (Obama's answers were incredibly long-winded) that he made a token reference to the need for governments to "live within their means" before adding that the "sequencing and pace" of deficit reduction would be different in each country. It wasn't what Cameron and George Osborne wanted to hear.

The irony is that there are some significant similarities between Obama's deficit reduction plan and the coalition's. As I noted in a recent Data Hound column, under the US president's plan, public-sector borrowing will fall from 10.9 per cent of GDP this year to 3.3 per cent in 2016. The coalition aims to reduce borrowing from 9.9 per cent of GDP this year to 1.5 per cent in 2016.

Thus, although the total fiscal consolidation planned by Osborne remains the largest, the difference is not as great as some imply. In addition, Obama plans to achieve three-quarters of the US deficit reduction through spending cuts, including lower debt interest payments, and the rest through tax rises, in a ratio similar to the coalition's 73:27 split.

But the crucial difference is that while the US economy has grown by 1.2 per cent in the past six months, the UK economy has flatlined. The strength of the US recovery means that Obama can afford to reduce the deficit without fatally weakening growth. The same, alas, cannot be said of Osborne's Britain.

George Eaton is political editor of the New Statesman.

Photo: Getty
Show Hide image

Ignored by the media, the Liberal Democrats are experiencing a revival

The crushed Liberals are doing particularly well in areas that voted Conservative in 2015 - and Remain in 2016. 

The Liberal Democrats had another good night last night, making big gains in by-elections. They won Adeyfield West, a seat they have never held in Dacorum, with a massive swing. They were up by close to the 20 points in the Derby seat of Allestree, beating Labour into second place. And they won a seat in the Cotswolds, which borders the vacant seat of Witney.

It’s worth noting that they also went backwards in a safe Labour ward in Blackpool and a safe Conservative seat in Northamptonshire.  But the overall pattern is clear, and it’s not merely confined to last night: the Liberal Democrats are enjoying a mini-revival, particularly in the south-east.

Of course, it doesn’t appear to be making itself felt in the Liberal Democrats’ poll share. “After Corbyn's election,” my colleague George tweeted recently, “Some predicted Lib Dems would rise like Lazarus. But poll ratings still stuck at 8 per cent.” Prior to the local elections, I was pessimistic that the so-called Liberal Democrat fightback could make itself felt at a national contest, when the party would have to fight on multiple fronts.

But the local elections – the first time since 1968 when every part of the mainland United Kingdom has had a vote on outside of a general election – proved that completely wrong. They  picked up 30 seats across England, though they had something of a nightmare in Stockport, and were reduced to just one seat in the Welsh Assembly. Their woes continued in Scotland, however, where they slipped to fifth place. They were even back to the third place had those votes been replicated on a national scale.

Polling has always been somewhat unkind to the Liberal Democrats outside of election campaigns, as the party has a low profile, particularly now it has just eight MPs. What appears to be happening at local by-elections and my expectation may be repeated at a general election is that when voters are presented with the option of a Liberal Democrat at the ballot box they find the idea surprisingly appealing.

Added to that, the Liberal Democrats’ happiest hunting grounds are clearly affluent, Conservative-leaning areas that voted for Remain in the referendum. All of which makes their hopes of a good second place in Witney – and a good night in the 2017 county councils – look rather less farfetched than you might expect. 

Stephen Bush is special correspondent at the New Statesman. He usually writes about politics.