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"Write something worth reading or do something worth writing" A blog by Amy Willis, a multimedia journalist based in London

David Cameron warns UK must move away from an economy based on debt

By Amy Willis

David Cameron gave further indication today as to why he believes the UK may be heading towards a bailout from the International Monetary Fund.

Following a statement before Christmas where he said he thought the UK was heading towards a bailout from the IMF, Mr Cameron has given further details, emphasising the need for the Government to move away from an economy based on debt, to an economy based on savings.

“[The UK] is in an extraordinary situation. Every child in Britain is born owing £17,000 and paying the interest on the debt the Government is accumulating will cost every child over £67,000 in taxes over his or her lifetime,” he said.

David CameronNational debt is scheduled to reach a higher level than when Chancellor of the Exchequer Denis Healey went to the IMF in 1976, he said. This means the UK is in a much weaker position than other countries and leaves the Government with less room for manoeuvre.

“Public spending is continuing to grow at an affordable rate, which will do real damage to jobs and prosperity in Britain,” he said.

He made calls for a change from a country and government that has lived beyond its means to one that lives within its means.

“I want to see resources for public services like the NHS and schools continue to grow, but we need to make sure that government as a whole doesn’t grow more quickly than the growth of the economy,” he said.

Mr Cameron said there were three key immediate changes he would make to the financial system:

1)    Changes to the Government’s recapitalisation scheme (including cuts in the coupon on the Government’s preference shares)

2)    A National Loan Guarantee Scheme to get money flowing to business

3)    Measures to ensure more liquidity for new business lending with new liquidity support for the Bank of England

He would also want to see Council Tax rates frozen for two years and Income Tax on savings for basic rate taxpayers, abolished.

He said: “We need to act now to set our public finances on a more sustainable path. Otherwise the burden of taxation becomes too great for businesses and families, acting as a drag anchor on recovery and harming the economy for the longer term.

“These changes would help the victims of the recession today, but in a way that builds our economy for the decades to come.”

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Filed under: Portfolio, UK News

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