Doubts grow, not economy, under UK austerity drive

October 2, 2011 - 2:15 AM

MANCHESTER, England (AP) — Jobs have been lost, libraries shuttered, sailors sacked and street lights dimmed — Britain is beginning to taste the bitter medicine David Cameron warned was necessary to fix its wounded economy. It's left some wondering: Is the remedy worse than the symptoms?

The prime minister, whose Conservative Party convenes here Sunday for its annual convention, made taming the country's runaway budget deficit his key priority when he took office in May 2010 at the head of Britain's first coalition government since World War II.

Though the sharpest measures of a 81 billion pound ($126 billion) four-year program of public spending cuts are yet to bite, there already are fears that the drastic action intended to slash Britain's debts has stalled the country's meager economic growth — a point of growing unease between the Conservatives and their left-of-center partners, the Liberal Democrats.

Figures released last month showed growth in Britain had slowed to 0.2 percent in the second quarter, diminishing hopes that the country's businesses can generate new jobs to replace public sector posts being lost under the austerity plan.

In the last year about 250,000 public sector workers have been laid off — while the country's jobless rate was 7.9 percent in the period between May and July.

Though Cameron's uncompromising plan to trim spending has won the confidence of credit rating agencies, the International Monetary Fund has warned that the U.K.'s growth is likely to stall further.

Last month the IMF cut its growth forecast for the British economy to 1.1 percent this year from its previous forecast of 1.7 percent in April, and urged Cameron to slow down the pace of austerity measures should growth fall even lower.

"From almost day one they had an austerity plan, but they had no plan for growth," said David Blanchflower, a professor at Dartmouth College and a former member of the Bank of England's Monetary Policy Committee, who has long been critical of Cameron's plans.

Opposition to Britain's spending cuts has already boiled over into street protests, with public sector workers marching on Parliament and students angry over rises to college tuition fees engaging in violent protests in central London, including an attack on a car carrying Prince Charles and his wife Camilla.

Analysts suspect riots which spread across England in August — when mobs of young people torched cars and looted stores in several major cities — were sparked in part by a sense of desperation among jobless urban youths.

As Cameron makes a keynote speech Wednesday on the last day of the Conservative Party convention, he must choose whether to press ahead with his austerity plan in spite of creeping public concern, or soften the program and offer measures aimed at kick-starting growth.

"The big economic policy question now is how to progress from financial stability to growth. With business and consumer confidence so low, there is a special responsibility on government — we are not bystanders," Britain's business secretary Vince Cable told the Liberal Democrat party's own rally last month, urging action.

Cable's party, led by deputy prime minister Nick Clegg, used their convention in the central England city of Birmingham to pledge to be more assertive in their role as junior partner in Britain's governing coalition.

Some vocal critics already discuss the looming breakup of Britain's coalition — most likely shortly before the country's 2015 national election. "If it's a marriage, well it's a good natured one, but I'm afraid it's temporary. We're staying together for the sake of the kids," Tim Farron, Liberal Democrat president, told the convention.

Steven Fielding, professor of political history at the University of Nottingham, said that so far Britain's public hadn't turned against Cameron's government, or its austerity plan — but stressed that many spending cuts slated for the next three years are yet to kick in.

"The cuts have been announced more than they have been applied; unemployment is rising, but it hasn't taken off. People are giving them the benefit of the doubt for now," he said

There is also a realization that as European trading partners labor under their own debt crisis and the U.S. grapples with a sluggish economy, Cameron may have little ability to deliver a return to prosperity. "The fate of this government is largely in the hands of people who don't live in Britain," Fielding said.

A ComRes telephone poll last month for The Independent put Cameron's Conservatives on 37 percent, ahead of the main opposition Labour Party on 36 percent. It was the first time the polling company had recorded a Conservative lead since Oct. 2010.

The survey of 1,000 adults by telephone between September 23 and 25, did not specify a margin of error, but it is typically plus or minus 3 percentage points in samples of a similar size.

Ed Miliband — elected as Labour chief a year ago after he narrowly defeated his better known brother David, the ex-Foreign Secretary — last week sketched the outlines of his own vision for Britain, ditching much of the legacy of predecessors Tony Blair and Gordon Brown.

He promised to overhaul Britain's "fast buck" culture by broadening out its financial services-dominated economy, to tighten flimsy regulation which allowed risky banking practices to fester, and — in a direct challenge to Blair's rhetoric — to challenge the eye-watering salaries racked up by executives.

Most strikingly, he drew a moral difference between "producers" or "predators" in business, suggesting that a future Labour government would introduce more stringent taxes and regulation for asset strippers, while supporting firms that create wealth and jobs.

Miliband also launched an offensive against those who claim welfare checks but contribute little in return to society, pledging to give priority for subsidized housing to working families or those who volunteer on community projects.

His pitch suggests a direct link between bankers pursuing risky trades for personal profit, tabloid reporters hacking voicemail messages, teenagers who looted stores during England's riots, lawmakers exposed over their wild expense claims and celebrities who accrue vast wealth despite showing little talent.

Britain is a country "too often rewarding not the right people with the right values, but the wrong people with the wrong values," Miliband said.

While Cameron will appeal to Britain to hold its nerve and reap the future reward of his economic remedy, Miliband hopes to tap a simmering sense of injustice among middle-income workers — many of whom have seen their living standards decline.

"We've ended up with a financial crisis and you've ended up footing the bill," Miliband said last week, rehearsing his likely 2015 election pitch.