Zero growth and job losses blow Osborne's deficit plans off course

 

Click to follow
The Independent Online

Government borrowing is expected to rocket to levels higher than would have been seen under Labour, despite George Osborne's deep spending cuts.

On a day when youth unemployment rose above one million, figures slipped out by the Treasury revealed how the Chancellor's deficit reduction plan has been blown off course by anaemic growth and high jobless figures. Labour claimed the pain of £40bn of cuts and tax rises had not been worth it.

The Treasury analysis of independent City forecasts showed that net public borrowing is now expected to soar to £412bn over the next few years. This is more than £100bn higher than the £303bn total projected by the Office for Budget Responsibility (OBR) a year ago, after the government-wide spending review. Crucially, it also dwarfs the £389bn four-year total OBR forecast based on the plans of Alistair Darling, his Labour predecessor, which the Coalition argued was much too high.

The OBR's official borrowing forecasts will be published on 29 November, alongside Mr Osborne's autumn statement, but are unlikely to be very different from those of the City analysts. The Chancellor will argue that the cuts were needed to prevent even higher borrowing, preserve the confidence of the financial markets and thus ensure low interest rates. Rachel Reeves, the shadow Chief Treasury Secretary, said the Treasury document showed the Government's strategy had backfired badly. "Trying to go too far and too fast has failed: it choked off the recovery and pushed up unemployment well before the eurozone crisis and we are now in a weaker position," she said.

Mr Osborne will unveil a "go-for-growth" package likely to include help for the young jobless; relief for companies that are heavy energy users; and a scheme to underwrite the deposits of home-buyers to boost the housing market.

The number of 16 to 24-year-olds seeking work increased by 67,000 in the three months to September to the highest total since comparable records began in 1992, with a jobless rate of 21.9 per cent, also a record.

A political row erupted after Chris Grayling, the Employment Minister, dismissed the one million youth unemployment figure as "a bit of a distraction" because it included almost 300,000 young people in full-time education. Admitting the statistics were "bad news," he insisted: "They are, I'm afraid, the consequence of what we are seeing in the eurozone."

Overall unemployment rose by 129,000 in the last quarter to 2.62m, its highest since 1994. To compound the gloom, British Gas, mining firm Rio Tinto Alcan and Clydesdale and Yorkshire banks announced 1,700 job cuts.

Comments