Chancellor tells CBI he will not change economic path

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Media captionGeorge Osborne: "Let's carry on doing what is right for Britain"

Chancellor George Osborne has told business leaders that he will not deviate from his plans to reduce the deficit.

"Now is not the time to lose our nerve. Let's not listen to those who would take us back to square one," he said to the CBI business group.

Mr Osborne said the government had a clear plan and it was working.

"Let's carry on doing what is right for Britain. Let's see this through", he said.

Mr Osborne's speech to the annual dinner of the CBI comes as figures showed UK unemployment rose by 15,000 in the first three months of the year to 2.52 million.

However, the number of people claiming Jobseeker's Allowance fell by 7,300 last month to 1.52 million, the figures from the Office for National Statistics (ONS) showed.

Reacting to the figures, Mr Osborne said: "The fact is, the most recent economic news has been more encouraging. The economy is growing. Surveys are better. Confidence is returning to financial markets."

The chancellor told the CBI that the argument to borrow money to increase government spending was "patently ludicrous" and that the idea for a temporary cut to VAT "simply doesn't stack up."

"So we will stick with our approach", he added, "which has seen the deficit cut by a third."

'Playing with fire'

Reacting to the speech, Chris Leslie MP, Labour's shadow treasury minister, said the chancellor was in "total denial about the failure of his economic plan".

"If we're to have a strong and sustained recovery, and catch up all the ground we have lost over the last three years, we need urgent action to kick-start our economy now and reforms to strengthen it for the long-term", he said.

"Even the IMF has warned the chancellor he is 'playing with fire' by sticking to the same failing policies and called for temporary tax cuts and greater infrastructure investment to boost the economy. It's time George Osborne listened before any more long-term damage is done."

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