'Our economy is not broken,' says UK finance minister, defending capitalism

By Reuters/William James   October 1, 2017 | 06:19 pm PT
'Our economy is not broken: it is fundamentally strong.' 

British finance minister Philip Hammond will defend his Conservative Party's management of the economy on Monday, seeking to stave off rising support for the opposition Labor Party's vision of a more centrally-controlled state.

Hammond is due to speak at the annual Conservative conference - seen as a chance for Prime Minister Theresa May's government to repair relations with the party's grassroots after a damaging botched election in June.

Divided over Brexit from activist level right up to cabinet ministers, and losing public support to a resurgent Labor led by socialist Jeremy Corbyn, May is leading a fragile minority government.

Hammond, finance minister for the centre-right party since July 2016, will talk up the merits of a free-market economy.

"Our economy is not broken: it is fundamentally strong," he will say according to advance extracts of his speech.

"The market economy frees people and businesses, encourages them to create, take risks, give ideas a go because they can see the results and benefit from their success."

That view has been challenged by Labor, who last week at their own party conference fleshed out plans for wide scale nationalization, higher government spending, and a more hands-on approach to the banking sector.

Hammond's words echo those of May, who last week issued her own defense of capitalism - a sign of growing concern about the threat Labor poses to the pro-business orthodoxy which has underpinned British economic policy since Margaret Thatcher's reforms in the 1980s.

"As this model comes under renewed assault, we must not be afraid to defend it," he will say.

"While no one suggests a market economy is perfect, it is the best system yet designed for making people steadily better off over time and underpinning strong and sustainable public services for everyone."

But, Hammond's arguments come after seven years of spending cuts that has tested the patience of the British public and failed to erase a deficit or bring down high levels of national debt.

With Brexit on the horizon, a slowing economy and the Bank of England hinting that interest rates could rise, May's government has little fiscal room for maneuver.

Britain's economy grew 0.3 percent in the second quarter after 0.2 percent in the first -- adding up to the slowest growth for any major advanced economy since the start of 2017, according to official statistics.

Last month rating agency Moody's downgraded Britain's credit rating, saying the government's plans to bring down its debt load had been knocked off course and Brexit would weigh on the economy.

The Conservatives will pledge 400 million pounds ($535.00 million) of additional road and rail spending, but Labor said the plans did not go far enough.

"Hammond just wants to continue with the seven years of Tory economic failure that has seen the level of investment in our country fall behind many of our international competitors," Labor's finance policy chief John McDonnell said. ($1 = 0.7477 pounds)

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