Key measures to stimulate the economy

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THE WORLD is facing a once in 70 years financial crisis and is suffering from debts not seen in decades.

Recovery from a debt crisis is both different and more difficult than recovering from a traditional recession. The solution for most countries cannot be simply to borrow more.

If the government doesn’t have the room to borrow more to cut taxes or increase spending, then people and markets start worrying about whether a government can actually pay back its debt.

And when this happens confidence ebbs away and interest rates rise, hitting people with mortgages and companies that want to borrow to invest.

We can see this happening right now in some European countries.

So a long term solution must tackle the fundamental problem - the problem of excessive debt.

Immediately we must get to grips with the Eurozone debt and restore credibility and confidence in the markets. But in a debt crisis of global dimensions we also need to co-ordinate our action across the world in order to boost world trade.

If we can’t get a deal involving everyone then we need a coalition of the willing, where countries like Britain who want to, can forge ahead with more ambitious proposals and others can join later if they choose.

Trade is the biggest wealth creator we’ve ever known and it’s the biggest stimulus we can give our economies right now.

Making Britain one of the best places in Europe to start, finance and grow a business is a key plank in our strategy for encouraging investments and exports as a route to a more balanced economy.

Everyone knows Britain’s small firms are struggling to get credit and banks are weak. George Osborne has announced he has set the Treasury to work on ways to inject money directly into parts of the economy that need it such as small businesses.

It’s known as credit easing and is similar to the National Loan Guarantee Scheme we talked about in opposition to get credit flowing.

Instead of just spending money that will never be recovered, the Treasury is looking at purchasing private sector assets such as corporate bonds that can be sold when credit conditions and the economy improve, and co-funding new lending by banks to small and medium-sized businesses.

So it does not add to the deficit but could help prevent another credit crunch by providing a real boost to British business; and over time help solve that old British problem: not enough long term investment in small business and enterprise.


MP for Horsham