On Monday 7 June, David Cameron made a speech in which he set out his view on tackling the budget deficit and debt. In a ‘textbook’ attempt at blaming the predecessors while preparing the public for the emergency budget on 22 June, he set out three reasons – the size of debt repayments, foreign investors, and the possibility of higher interest rates – for why he believes “there is only one option in front of us: to take immediate and decisive action”.

I am in no doubt that the budget deficit must be addressed, and must be a priority for the new coalition government. But I do not agree that the immediate, harsh and unfair cuts that have been swung into action are the right way to achieve this. And while I am in total agreement that the three reasons he gives underpin the need for a clear and cohesive plan for deficit reduction, not one of them tells me why it needs to happen immediately, when immediate action risks our economic recovery. Indeed, as the CIPD report today shows, unemployment is likely to rise to three million – for the life of this parliament – if the government chooses this course.

The day after Cameron’s speech, I gave my maiden speech to the House of Commons. In it, I warned the government about the impacts of their actions, and in particular of the consequences of undermining the strong, sustainable growth that is key to bringing the deficit down. The Labour government succeeded in securing a fragile recovery which this government must ensure is entrenched, not reversed.

Cameron seemed to dismiss the need to be worried about a strategy for growth by claiming that “much of the deficit is structural”. That is to say it would not be resolved by the increased tax revenues and decreased benefit expenditure that comes as a result of growth. Of course the deficit would not be eliminated by this alone – no-one is saying that – but the answer is still not be to pursuing a strategy that looks likely to choke off the existing economic recovery and further worsen that proportion of the debt that is cyclical. And a policy for delivering strong growth and a better balanced economy would reduce the structural deficit too – as that depends on trend growth.

David Cameron has justified his actions by the need for ‘confidence’ in our economy. Without this, he rightly claimed, investors would simply go elsewhere. But he doesn’t seem to have considered the impact a double-dip recession on investors and confidence. Again, it is absolutely right that we should have a clear plan for how the deficit will be brought down – but it will be this, with the reassurance that a further recession will not be the outcome, that will bring the all-important confidence.

The prime minister at least acknowledged that the UK is not in the same situation as Greece. While I am relieved to hear that he is seeing sense on this issue – unlike his Liberal Democrat colleagues who are using their ‘Greek defence’ as the excuse for changing their minds on how and when the cuts should come – he needs to throw his glance further than Greece, and look to learn the harsh lessons from Japan. Today, debt in Japan is 190 per cent of gross domestic product, which is 2.5 times the level of the UK. Japan’s debt is so high precisely because its government did not take swift action to ensure that its economy emerged from recession with strong growth. We are not yet Japan, but Cameron should heed the advice of Adam Posen, an external member of the Bank of England’s monetary policy committee. In a speech last month he said that “The UK and US economies are at low risk of turning Japanese in the sense of having recurrent recessions through macroeconomic policy mistakes – but deflation itself cannot be ruled out.”

‘Immediate and decisive spending cuts’ may sound tough and decisive, but Cameron’s coalition must not risk the economic destiny of Britain for political expediency. They must accept we are not Greece, while learning the lessons of Japan. And Cameron must not be swayed by the misconceived adoption of austerity measures in other European countries – which I believe are a panicky overreaction, and in themselves could be dangerous for the global economy. As the US treasury secretary Tim Geithner said this week, plans to get borrowing down need “to happen in a way that’s growth friendly”. It is for this reason that David Cameron – regardless of what reasons he gives – is plain wrong. The very worst thing he could do right now for our economic future is to take £6 billion out of the economy with no simultaneous plan for securing future growth, jobs and a rebalanced economy.

Photo: Bashed 2007