George Osborne: UK economic recovery is on track

Chancellor George Osborne: ''The economy is growing, more jobs are being created''

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Chancellor George Osborne says UK economic recovery is "on track" despite "challenging" global conditions.

He was responding to the Office for Budget Responsibility's (OBR) upgrading of its 2010 growth forecast, but lowering of those for 2011 and 2012.

Mr Osborne said the UK economy was moving towards "sustainable growth", with more exports and investment.

Labour said this year's growth was the result of its policies. Coalition cuts plans were a "reckless gamble".

The chancellor's autumn statement to MPs was being eagerly followed by financial markets looking to see how well the coalition's deficit reduction plan was coming along, especially in the light of events in Ireland and elsewhere in the eurozone.

'Plan working'

The OBR - formed in May to make an independent assessment of the public finances ahead of each Budget - has revised its growth forecast for this year from 1.2% to 1.8%.

But it has lowered its estimate for 2011 from 2.3% to 2.1% and that for 2012 from 2.8% to 2.6%.

Analysis

Do 152 pages of numbers, charts and sometimes impenetrable text change the terms of the argument over the economy that rages daily in Westminster?

The OBR's reduction of the numbers of jobs set to disappear in the public sector at the very least makes it harder for Labour to throw accusations at the coalition that jobs will be recklessly slashed without care or attention.

And the estimates that private sector jobs will more than compensate for those which disappear underlines that. Yet it also raises a different question for the coalition, one that is not asked too often. Should public sector jobs be maintained just because the taxpayer can afford to pay for them?

The coalition will cling to the predictions that employment and GDP should go up year on year. And they will welcome the independent judgement that it is more likely than not, that the government will balance the books in the tight framework they have set for themselves.

But there is nothing in the report that suggests anything buoyant about the economic picture they expect in the next few years.

Labour will continue to point to sluggish growth, and what they term the deceit upon which the coalition's argument is based - that their action has brought Britain 'back from the brink' - an idea they continue to reject.

The OBR has cut its forecast for public sector job losses over the next four years from 490,000 to 330,000.

But it said it expected total unemployment to rise to a peak of just over 8% in 2011 - in line with previous forecasts - before falling to just over 6% by 2015.

Delivering his statement, Mr Osborne said the UK was "moving from an economy based on debt to an economy where we invest and export".

He told MPs the OBR's assessment was that there "will be no double-dip recession", with "considerably higher" growth this year than it had predicted in June.

Mr Osborne also said: "After the deepest recession since the war, the greatest budget deficit in our peacetime history and the biggest banking crisis of our lifetimes, recovery was always going to be more challenging than after previous recessions.

"But the message from the Office for Budget Responsibility is that Britain's economic recovery is on track. The economy is growing, more jobs are being created and the deficit is falling."

The chancellor announced the government was publishing "the most significant programme of corporate tax reforms for a generation".

"We propose to make the UK an even more attractive location for international business and investment, by reforming the outdated and complex rules for controlled foreign companies," he said.

And, from April 2013, there would be a lower 10% rate of corporate tax levied on hi-tech firms' profits from newly commercialised patents, Mr Osborne added.

'Better than 50% chance'

The OBR has slightly reduced its forecast for public borrowing in the current financial year to £148.5bn from £149.5bn.

Shadow Chancellor Alan Johnson accused George Osborne of ''taking an unprecedented gamble with people's livelihoods''

In its report, it said: "Our central forecast is that the economy will continue to recover from the recession, but at a slower pace than in the recoveries of the 1970s, 1980s and 1990s.

"This relatively sluggish medium-term outlook reflects the gradual normalisation of credit conditions, efforts to reduce private sector indebtedness and the impact of the government's fiscal consolidation."

It OBR added that the government had a "better than 50%" chance of meeting its mandate to wipe out the structural deficit - the gap between spending and taxes - by 2015-16.

For Labour, shadow chancellor Alan Johnson accused the coalition of risking the UK's future prosperity with its programme of spending cuts.

He added: "For families up and down this country, a jobless recovery will be no recovery at all."

Jobs concern

Mr Johnson also said: "This autumn statement does nothing to alleviate the effects of the summer recklessness that led the chancellor to gamble with our future."

TUC general secretary Brendan Barber said: "George Osborne may claim that the Office for Budget Responsibility has vindicated his approach, but he must have missed the forecast showing unemployment little better than static for the next three years. What is the point of economic policy if it does not include getting people back to work?"

But John Cridland, director-general designate of the CBI business group, said: "It is reassuring that the OBR has confirmed the CBI's view that we are on an upward growth trajectory. This should be able to deliver a rebalancing of the economy and sustainable job creation.

"The statement has also provided encouraging signs of a more competitive UK corporate tax regime."

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