UK Politics

Osborne predicts 'turmoil' if cuts and tax rises halted

Media captionSpeaking on The Politics Show, the chancellor says he has had to make "tough, difficult decisions"

Chancellor George Osborne has warned there would be "financial turmoil" if he abandoned cuts and tax rises.

Mr Osborne told the BBC no politician liked cutting spending and increasing taxes, but he was trying to clear up the "mess" Labour had left.

He hinted union laws could be changed if there were a wave of strikes.

Writing in the Independent on Sunday, shadow chancellor Ed Balls accused Mr Osborne of being in denial about the risks to jobs and growth posed by cuts.

He said his plan to eliminate the deficit by 2015 was "irresponsible and dangerous", and there was an alternative.

He pointed to the US economy, which saw growth towards the end of last year, as an example.

"Supporting job creation, reforming our financial systems and investing in jobs for the future is the best way to get economies moving again and to cut the deficit," he said.

"Simply slamming on the brakes with drastic tax hikes and deep spending cuts is not a credible economic policy."

In the chancellor's interview with the BBC Politics Show, Mr Osborne said: "I feel every day a huge responsibility to get these decisions right for Britain.

"This is an enormously tricky situation that we've been bequeathed as a new government," he said.

And he added that he was fulfilling his responsibility to the best of his ability.

Earlier in the week union leaders met in London to discuss co-ordinated protests in the face of what they see as "deep and rapid" cuts in spending, but stopped short of announcing strike ballots.

On Friday Mr Osborne said he was as determined to fight "the forces of stagnation", including the unions, as he was to tackle the budget deficit.

He reiterated his position that there could be changes in union laws.

"We are prepared to consider changes to the law around strikes - as a last resort - but I hope we never get there, because I hope we can have a mature, grown-up conversation.

"I completely understand that trade unions want to represent the interests of their members, but the interest of their members is that jobs are created and prosperity returns to our country."

'Consistent growth'

Mr Osborne has been discussing financial issues at the World Economic Forum in Davos, in the same week that it emerged the UK economy contracted by 0.5% in the last quarter of 2010.

He said despite the adverse weather effects of the UK's coldest December for 100 years, the figures were still disappointing.

Mr Osborne told delegates the UK must move from "securing financial stability" to "securing consistent growth".

The chancellor said he planned to achieve this through debt reduction, cutting corporate tax rates and reforms to the health and education sectors.

"So the challenge for the government in the next year or so is to remove the supply side obstacles to growth," he said.

"The [other] challenge to me is that UK corporates are sitting on cash on their balance sheets equivalent to about 5% of GDP. What I've got to do in the next few months is to persuade them to start spending that money."

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