BIRMINGHAM, England (Reuters) - British Prime Minister David Cameron said on Tuesday he would not soften his austerity program with a “Plan B” of slower spending cuts after the International Monetary Fund downgraded its growth forecasts for Britain.
The Conservative-led government, steadfast in its ambition to cut a record budget deficit but under pressure to fix a recession-hit economy, abandoned its original deficit reduction targets last year and could be forced to extend them again.
“What we need in Britain is not ‘Plan B’, which is more borrowing. How can you borrow your way out of a debt crisis?” Cameron told Sky News, speaking from the Conservative Party’s annual conference in the central English city of Birmingham.
“What we need is what I call ‘Plan A+', we need to keep our plans, difficult though they are to cut public spending and deal with the deficit, but we need to add to that every measure that business has been asking for. And that’s what we’re doing.”
The IMF cut its UK economic growth estimates on Monday, predicting the economy would shrink 0.4 percent this year before growing by 1.1 percent in 2013. The IMF forecast in July that Britain’s economy would grow 0.2 percent this year and 1.4 percent in 2013.
The IMF also said Britain should delay some spending cuts penciled in for next year if growth turned out to be weaker than forecast, but Cameron said that did not mean there was any logic in ripping up his plans yet.
“The IMF are not saying change course, they are saying stick to your plan unless things get dramatically worse,” he said.
Britain’s economy fell back into recession at the end of 2011. Analysts expect Britain to return to growth in the third quarter but say that any recovery will be sluggish at best.
Critics, including the Labour opposition, blame government austerity measures for choking off demand but ministers say cutting more slowly would put Britain’s market credibility at risk at a time when the euro zone is embroiled in a debt crisis.
“These downgraded IMF forecasts are another damaging blow to the government’s economic credibility,” said Labour finance spokesman Ed Balls.
Finance minister George Osborne is expected to either announce deeper cuts or to further extend his deficit reduction plan beyond the fiscal year 2016/17 when he delivers updated economic growth and borrowing forecasts on December 5.
Osborne had originally pledged to all but erase Britain’s deficit by the time of the 2015 election.
Editing by Louise Ireland and Alessandra Rizzo