Emergency budget
Mr Cameron confirmed that a future government would hold an emergency budget within fifty days of taking office to cut the deficit and boost economic recovery.
He said that it would be a budget "that, yes would be about getting the deficit under control and having a credible plan... but it should also be a budget that goes for growth and that gets the economy moving again".
He added: "We need to do both of them and we need a government that has the power and the long term vision to get on with it."
"Scorched Earth"
The Conservative leader also urged Gordon Brown to show the courage needed to take steps to tackle the deficit, but accused the government of pursuing a "scorched earth" policy with the nation's finances.
"Let's hope this lot don't have a scorched earth policy of wrecking our country before they finally lose. Let's hope they do the responsible thing but the evidence so far doesn't look very good," he said.
EU President
Mr Cameron said that while he did not support the creation of a President of Europe, he welcomed the choice of Herman van Rompuy.
He said if Europe was to have a President, it was "better that it's someone who is going to chair the Council of Ministers and recognise that he is the servant of the nation states of Europe not the master of the nation states of Europe".
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SUNDAY TELEGRAPH 22.11.09
An inflationary spike is not just hot air - it's a very real threat
In October, UK inflation rose sharply - with the Consumer Price Index up 1.5pc annually, compared with 1.1pc the month before. Most prominent British economists say this is a "blip" and that "deflation" remains the most serious danger. I'm afraid such economists are wrong.
By Liam Halligan
October's CPI rise, the first in eight months, is the start of a trend that will see UK inflation go up faster, and further, than is currently being acknowledged.
Far from deflation, it won't be long before Mervyn King, Bank of England governor, is writing a public letter to the Chancellor explaining why the CPI has reached 3pc – a full percentage point above the Bank's 2pc target.
There are many reasons for this – most of which should be obvious to any decent economist, whatever the "deflationists" say. For one thing, current inflation data continues to benefit from last December's VAT cut. The Office for National Statistics estimates that, without that reduction from 17.5pc to 15pc, the CPI would now be 0.5 percentage points higher. So expect a one-off inflation "jump" in January, when the VAT cut is reversed.
More importantly, oil prices will soon add enormously to UK price pressures. With crude well above $70 during most of October, higher petrol costs accounted for a large part of last month's CPI spike.
Yet this is nothing compared with the "adverse base effects" which will be felt in the coming months. Consider that in November 2008, oil prices averaged $67 a barrel but have averaged $78 during the first half of November 2009. Showing no sign of falling soon, oil is set to be 16pc dearer this month than during the same month last year – which will add mightily to November's inflation number.
Going forward, these base effects become even more vicious – seeing as oil fell sharply during the last quarter of 2008 and the first three months of this year, getting close to $40 in February and March.
By next February and March, given that crude is currently close to $80, and on an upward trend, the annual percentage oil price rise could be horrendous, adding rocket-boosters to the CPI. Even if oil stays roughly steady in the coming months – which may be wishful thinking, given that the energy-intensive emerging markets are now growing extremely quickly again – crude will be 90pc higher next February than it was in February 2009. That would push the CPI above 3pc and beyond – which is why Mr King may be forced to pen the letter I mentioned to his good friends at the Treasury.
Then there's sterling – with the pound's weakness adding further to upward price pressures in the near term at least, given that British consumers will pay more for imports. The UK's fiscal and monetary policy has also been widely expansionary in recent months – to a greater extent than during any period in our peacetime history.
New figures show public debt soared last month to £11.4bn – the highest October on record. In the seven months since April, the Government has amassed more debt than during the entire 2008/09 fiscal year. The UK is now on course to borrow £220bn in 2009/10 – probably more – while running a budget deficit equal to 13.3pc, the biggest of any major economy. At the same time, thanks to "quantitative easing", we've almost tripled the size of our monetary base in less than eight months. You tell me that's not inflationary.
In response to this torrent of evidence, the Bank's Monetary Policy Committee relies on the extremely dubious concept of the "output-gap" – peddling the theory that because the UK is contracting, there is a mountain of "spare capacity". That apparently means we can print money and borrow like crazy, without fear of stoking inflation.
The minutes of the MPC's October meeting, published last week, argue that UK inflation will remain subdued going forward because "downward pressure from the persistent margin of spare capacity will be the dominant force".
This is nonsense, of course – given the extent to which the credit crunch has actually destroyed the economy's productive capacity. As bank lending has stalled and demand lapsed, firms are shutting and workforces dispersing. That is what always happens in deep, banking-related slumps. So much for the "output gap" – yet another intellectual conceit designed to justify mad money-printing and the racking-up of even more government debt.
My view that inflation will spike across the Western world is dismissed by many as "alarmist". Yet I'm afraid it is now widely-held by many professional investors and becoming more popular all the time.
That's why Warren Buffett, American icon and the world's most successful investor, put his patriotism to one side last week when he admitted: "I'd rather own physical assets than own dollars". And that's why gold – now well above $1,100/oz – continues its steady climb.
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