David Cameron has moved swiftly to prevent Britain’s tough Budget becoming another potential thorn in his relationship with President Obama.
The Prime Minister used a telephone call on Tuesday night to explain why he planned to cut Britain’s deficit at a significantly faster rate than the “credible” path cited by Mr Obama in the US.
Mr Obama told G20 leaders before this weekend’s summit in Toronto that all leaders had to learn the lessons of the past when stimulus was withdrawn too quickly “and resulted in renewed economic hardships and recession”.
Mr Obama said that he was setting a “credible, medium-term fiscal path” by halving the US budget deficit by 2013 and reducing it to 3 per cent of national income by 2015, a rate similar to the one set out by Labour.
George Osborne’s Budget went faster and further to the tune of £40 billion, cutting the budget deficit from 10.1 per cent of national income this year to 3.5 per cent in 2013-14 and 1.1 per cent in 2015-16.
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The pace has raised concerns among some economists that the tough measures may choke off growth and take Britain back to the cusp of a double dip recession.
In their conversation on Tuesday Mr Cameron set out his Budget measures and explained why the coalition had gone to such lengths.
The Prime Minister’s spokesman insisted that there was no difference between the pair regarding the speed of deficit reduction.
He pointed to wording in Mr Obama’s letter to G20 leaders, in which he said that the timing and pace of consolidation should suit national circumstances, as well as the needs of the global economy.
“There’s agreement on this issue, that different countries will implement policies appropriate to them,” he said.
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“And there’s agreement on the need for fiscal consolidation and the need for policies that support growth.”
Mr Cameron will meet Mr Obama face to face for the first time since taking office when they attend first the G8 summit, followed by the G20 this weekend.
Since they spoke warmly on his first day in Downing Street, their relationship has been rocked by the BP oil spill in the Gulf of Mexico, which they will discuss in Toronto.
Mr Cameron said yesterday that it was critical to both the US and Britain that BP remained a “strong and stable” company.
It remained vital for the BP’s health that they received clarity from the US about how much their compensation bill would be, rather than leaving it open-ended.
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The pair had talked about the Deepwater Horizon disaster on Tuesday night, he told MPs at Question Time. “Yes, of course BP itself wants to pay for the clean-up, wants to stop the gushing of the oil into the Gulf, recognises it’s going to have to pay money in respect of fishermen and others who have lost their livelihoods.
“But we do want to make sure that this remains a strong and stable company, for our benefit, but also for the benefit of the United States.”
Mr Cameron said that more than 40 per cent of BP’s shareholders were from the US, while 39 per cent were from Britain. BP employed more people in the US than it did in Britain, he added.
“So it’s in all our interests that this company is strong and secure for the future.”