For months, David Cameron has painted a radiant picture of the UK recovery. In his autumn conference speech, he boasted about the “fastest-growing major advanced economy in the world”.
Then on Sunday, there was a sudden change of tone. Speaking at the end of a summit in Brisbane, the UK prime minister warned in strong terms about the risk of another recession. Red lights were “once again flashing on the dashboard of the global economy”, he said, against a backdrop of geopolitical instability.
The new gloom is no accident, reflecting a Conservative party message that will be heard repeatedly in the run-up to May’s general election. To paraphrase: “Don’t risk the recovery by voting for a new government.”
Mr Cameron warned the eurozone was teetering on the brink of a third recession. Emerging market economies – which had been driving world growth – were slowing.
A Downing St spokesman said Mr Cameron was merely drawing attention to undisputed “headwinds” that could pose a risk to all economies.
Mark Carney, governor of the Bank of England, said only last week that economic weakness in the eurozone could sap growth.
But, the UK should not be “overly troubled by foreign nightmares”, Mr Carney added.
Mr Cameron’s blunt warnings are an attempt to focus voters’ attention back on the economy, where the Tories have a strong poll lead over the Labour opposition.
“There has been growth in the last few years in the UK economy but there are political risks of not sticking with the plan,” said a Tory aide.
The party’s central election message will be that it has a “long-term economic plan” in contrast with Labour. This is a phrase that polls well with voters, according to officials.
Tory advisers, including former Obama aide Jim Messina, believe that – along with Mr Cameron’s leadership – the economy is one of the party’s strongest cards.
However, in recent months the Conservatives have watched the economy sink below immigration, the NHS and the cost of living on the list of voters’ priorities.
Mr Cameron’s intervention represents an attempt to push it back up the agenda.
“They are saying don’t take the recovery for granted and that it was not just down to luck,” said Joe Twynman, head of political research at pollster YouGov. “With the Rochester and Strood by-election coming up, they want to shift the focus away from immigration and back on to the economy.”
Tom Mludzinski, head of polling at ComRes, said it was an interesting tactic.
“The economy is the Tories’ strength and yet the issue is becoming less potent because things are going well,” he said. “The good economic news has brought bad political news for the Conservatives as voters are less concerned with economic credibility – a Tory strength . . . but it’s a risky technique to warn about dark clouds on the horizon because some people will ask what they have been doing for the last five years.”
The comments should be seen in the context of this year’s Autumn Statement – now only a fortnight away – when chancellor George Osborne is expected to unveil some far from glorious data on the public finances.
Income tax revenues are falling short of official Budget forecasts from March, despite the recovery. That means officials may have to increase their estimates for the size of the “structural” deficit: the part that is not eroded by economic growth and must be tackled by spending cuts or rises.
As such, Mr Cameron’s message is designed to play down expectations of immediate handouts to the public: at least not until after the general election.
Advance warning on public finances
When David Cameron opines about the world economy, he does so knowing the outlines of the official UK forecast to be included in the Autumn Statement on 3 December, writes Chris Giles.
The Office for Budget Responsibility has already shown at least one round of economic and tax forecasts to ministers and the prime minister will know how healthy the public finances appear to be.
There is much to be worried about – weak income tax revenues, a falling oil price and lower housing transactions will hit receipts to the exchequer this year. Instead of borrowing falling by more than £10bn this financial year to £95.5bn, the risk is the shrinking of the deficit has stalled.
The OBR also needs to think about whether the underlying deficit – which will not disappear through growth alone – has increased after another year of falling unemployment without significant improvement in the public finances.
Forecasts for debt interest payments are likely to be lowered in the statement, helping the public finances; and the UK growth forecast for 2014 will be revised higher from 2.7 per cent to about 3 per cent. But these pieces of good news are unlikely to offset bad news on borrowing.
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