Press Release: Tories right on deficit

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Commenting on the Prime Minister's speech on the deficit, Head of Research at the Adam Smith Institute, Ben Southwood, said:

David Cameron is staking out the right position on the UK debt and deficit.

The Conservatives' macroeconomic approach has been appropriate, bringing down the deficit but keeping aggregate demand steady with monetary policy. With inflation running above target for four years and hitting 5.2%, it is nigh-on impossible to claim that cuts have hurt the economy.

Markets have confidence in the UK's ability to pay off its national debt, so we should not worry about a debt 'catastrophe'—but that doesn't mean the government shouldn't work to get its finances under control.

Cuts are necessary because (as long as the economy is stable) when the government borrows, it uses up funds that could have been put into other activities. A large body of academic research bears out the claim that government deficits 'crowd out' private investment.

Notes to editors:
The Adam Smith Institute is an independent libertarian think tank based in London. It advocates classically liberal public policies to create a richer, freer world.