Osborne vows to continue with deficit reduction

The Chancellor, George Osborne has delivered his key note speech at the Conservative Party Conference in Birmingham today.

Mr Osborne confirmed that there is to be no change of economic policy and that the government is to continue focusing on reducing the deficit and protecting the UK’s triple-A credit rating that allows borrowing levels for government, business and households to remain low.

In a speech that received moderate applause from the conference audience Mr Osborne confirmed that the Conservative Party plans to “finish the job that we have started.”

Mr Osborne said: “Today in the face of the great economic challenged of our age we resolve we will press on we shall overcome.”

Mr Osborne blamed the lack of economic growth and difficulties in reaching his own deficit reduction target son Labour, oil prices and the euro debt crisis.

He said: “The damage done by the debts and the banking crisis was worse than we feared. The rise in the world’s oil price has been larger than anyone forecast and sadly the predictions about the euro turned out to be all too true.”

Mr Osborne said that the deficit has been reduced by 25 per cent since the Conservative Party gained power. This is true for the current year deficit in that the deficit was £160 billion in 2010-11 and down to £119.7 billion in 2011-12. However, the overall deficit has actually increased and the first five months of this year suggest that the current deficit for 2012-13 will come in above target.

Mr Osborne defended the focus of the government’s economic policy being on deficit reduction and said that the government had been brave to be honest with voters.

He said: “Few political parties are prepared to take the risk that we did. Quite simply we told the truth about the long hard road ahead.

“Our country would have been all but ungovernable if we had not been straight with the public before we asked them to cast their vote.

“We are still all in this together.”

Mr Osborne said that the richest in society would shoulder the heaviest burden in terms of paying for the deficit but he did not give any specific policies showing how this would happen.

He ruled out a tax on high-value properties supported by his coalition partners, the Liberal Democrats.

Mr Osborne said: “When it comes to the richest, the first place I will look is to those who are still not paying the taxes we expect them to pay today. We will continue our ruthless pursuit of tax evasion.

“And I’m determined that once again the great bulk of savings must come from cutting government spending not raising taxes.

He spoke about getting the balance right in not cutting “too hard and too fast”. Labour has criticised the Conservative Party for doing this, but some in his own party believe Mr Osborne has not gone far enough.

He said: “We’re reducing the size of government by 50 per cent of our national income to 40 per cent in just five years. I just don’t think it is realistic to cut aggregate deal faster than that. And as we reduce employment in the public sector we have to do it at a pace that allows the private sector to fill the gap.”

Mr Osborne was careful to present his plans to illustrate how tax cuts will ensure fairness for working people.

He said: “It’s wrong that it is possible for someone to be better off on benefits than in work and we are right to change that too.

“That’s why I insisted on a cap on benefits so that no family can earn more out of work than the average family earns in work.

The speech was notable for its lack of specific ideas on how to generate growth.

Mr Osborne introduced one new idea; that of allowing employers to operate schemes that give shares to employees in return for the loss of certain employment rights.

Mr Osborne’s speech provides some clues as to what he will say on December 6th when he presents his Autumn statement.

He will certainly introduce £10 billion worth of welfare cuts to be introduced from 2016, which will see benefit claimants not receive increases if they have more children and they are not working and will mean young people cannot claim housing benefits if they are unemployed but will have to live with their parents.

Mr Osborne said: “Our public sector spending plans were designed to give us flexibility and credibility. Our detailed tax and spending plans have bought us stability but they only cover the next two years and we must know take some very serious decisions about what we do after that.”