Page last updated at 12:44 GMT, Sunday, 14 December 2008

Ministers 'over-cooking' downturn

Sir John called the government's approach to the recession a 'train wreck'

Former prime minister Sir John Major has accused the government of "over-cooking" the economic crisis to justify the rising size of its debt.

He said ministers had been right to recapitalise banks but added that they had since "got their politics wrong", which would deepen the recession.

Sir John also told BBC One's Andrew Marr Show there could be an "avalanche" of job losses in the new year.

But the government said it was working to get out of the recession "faster".

'Help for savers'

Sir John, who himself had to deal with a recession while prime minister from 1990 to 1997, said it had felt "pretty awful".

Asked whether ministers were scaring people too much over the current economic downturn, he said: "I think they are.

"I think they're over-cooking it because I think they're concerned and they wish to justify the amount of debt they're getting us into.

"I think that is a mistake for a raft of reasons. I don't downplay the seriousness of this: I think this is the worst situation we have had since the Second World War.

At the moment policy helps the imprudent and penalises the prudent
Sir John Major

"And after 12 years of Labour government, we now have a level of national debt that is the same after six years of world war."

Sir John said: "If we continue borrowing like this, the world will be coming out of recession and we will have a huge amount of borrowing that will force up interest rates.

"In three years' time, as the world comes out of recession, in the United Kingdom we will have higher interest rates, we will have higher national insurance contributions because the government have already implemented that, and we will have higher taxes."

VAT change

The government's actions were "ensuring that our recession is longer and deeper than anybody else's".

In his pre-Budget report last month, Chancellor Alistair Darling announced a package of measures including cutting the VAT rate from 17.5% to 15% until the end of 2009.

He also said the level of pension credits would rise, with pension and child benefit payments going up in January, rather than April.

Mr Darling predicted that public sector borrowing would be 78bn this year, going up to 118bn next year.

He added that, from April 2011, all rates of National Insurance contributions would be increased by 0.5% for all employees and employers and proposed a 45% rate of income tax for those earning more than 150,000 a year, from the same date.

I don't expect to be invited back to the frontbench. I think it would be a mistake to move George Osborne from shadow chancellor
Ken Clarke MP

Sir John said: "I don't think most of the government's actions are wise. Recapitalising the banks was fine... Since then they have got their policies wrong."

Of the VAT reduction, he added that ministers "might as well have burnt the money and thrown it away".

Sir John called for more protection for savers, including no tax on interest on the first 5,000 in bank and building society accounts.

He said: "At the moment policy helps the imprudent and penalises the prudent."

However, Sir John refused to endorse calls by some commentators - including former Tory defence secretary Michael Portillo - for ex-chancellor Ken Clarke to be given a frontbench Conservative role, possibly replacing George Osborne as shadow chancellor.

He said Mr Clarke was a very able man" but added that he refused to join a "clamour for change".

'Enjoying myself'

Mr Clarke told Sky News' Sunday Live programme: "I don't expect to be invited back to the frontbench. I think it would be a mistake to move George Osborne from shadow chancellor.

"And I'm enjoying myself as I am, as a freelance backbencher. I think I'm more use to the party there."

Talking about the recession which affected the UK during the early 1990s, Sir John said: "Anyone who believes those in government don't suffer from that are quite wrong...

"I remember the difficulties one felt and the helplessness one felt."

Chief Secretary to the Treasury Yvette Cooper told the Andrew Marr Show she "completely disagreed" with Sir John's analysis.

She said: "John Major's government actually doubled the level of national debt and also pushed borrowing up to about the same proportion of national income that we are seeing here.

"But that was as a result of a home-grown inflationary problem where interest rates hit 15%, not as a result of the biggest financial crisis to hit the world for very many generations."

The government's actions would "help us come out of this stronger and faster", she added.

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