The government will stand firm over its plans to cut public spending in the event of a double-dip recession, says Cabinet minister Philip Hammond.
The transport secretary said the coalition would not bow to pressure to scale back its cuts in order to protect the economy from short-term shocks.
He said Whitehall departments will be working within “firm and clear” four-year budgets and any additional stimulus to the economy would have to come from the Bank of England – probably in the form of quantitative easing, or printing money, as opposed to a loosening of fiscal policy.
The minister made the claim after fellow fellow Cabinet member Chris Huhne, the Liberal Democrat energy secretary, suggested the coalition could rein in its massive cuts programme if the economy entered another downturn.
Mr Hammond, a close ally of George Osborne, said: “Our view has always been that fiscal policy should be set for the medium term, and monetary policy should be used to deal with any short-term shocks.”
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