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Ministers 'comforted' over cuts
Deputy Prime Minister Nick Clegg has appeared to admit that the coalition cut capital spending too deeply when it took power.
Speaking on Thursday night, he said ministers had "comforted" themselves at the time that the reduction was in line with plans drawn up by the previous chancellor, Labour's Alistair Darling.
Mr Clegg said ministers now realised money for infrastructure was needed to foster recovery and the Government must do more to fuel capital investment if Britain does plunge into a triple-dip recession.
In an interview with The House magazine, he said: "If I'm going to be sort of self-critical, there was this reduction in capital spending when we came into the coalition Government.
"I think we comforted ourselves at the time that it was actually no more than what Alistair Darling spelt out anyway, so in a sense everybody was predicting a significant drop off in capital investment.
"But I think we've all realised that you actually need, in order to foster a recovery, to try and mobilise as much public and private capital into infrastructure as possible."
Asked if the Government should change tack if that becomes a reality, Mr Clegg said: "What kind of things do I think we need to do where we can? I would single out two things.
"Firstly, we need to try, wherever we can, to put money back in the pockets of people on middle and low incomes, because all the evidence is that it is those people that will tend to spend a bit more money on the high street if they feel they've got a few extra pennies in their pockets."
He added: "And secondly, wherever we can we've got to mobilise more capital investment into productive capital because the economic evidence is overwhelming. It helps create jobs now, people go on to construction sites, it raises the productive capacity of the economy in the longer run."
Labour has repeatedly urged the Government to implement a "plan B" for economic recovery based on temporary tax cuts and to bring forward long-term infrastructure investment.
Rachel Reeves, shadow chief secretary to the Treasury, said: "This is the first admission that this Government has made serious mistakes on the economy. But the real question is what Nick Clegg's Government is going to do about it. We have urged ministers to bring forward infrastructure investment and build thousands more homes, but they have refused to listen.
"Nick Clegg also claims he wants to put money into the pockets of people on middle and low incomes. So he should now admit that the VAT rise was a mistake and cancel the plan to cut tax credits for working families on modest incomes on the day millionaires get a tax cut."
Asked whether the Prime Minister agreed with Mr Clegg's assessment that capital spending was cut too deeply, David Cameron's official spokesman said: "The PM's view is that the right decisions were taken.
"As the Treasury has explained, the Government is spending £20 billion more on infrastructure than in plans prior to the 2010 Spending Review, including increases in infrastructure spending in the last two autumn statements, which have been possible in part because of the progress that has been made in reducing current spending."