Chancellor faces down Cabinet 'jitters' about economic strategy

George Osborne has been forced to fend off doubts about his economic strategy from cabinet colleagues worried that growth is so weak. The Chancellor, who refuses to consider a "Plan B", defended his approach in a discussion on Britain's economic prospects at Tuesday's cabinet meeting.

One minister described the doubts as "jitters" rather than demands for a change of course. It is understood that the most searching questions were asked by Conservative rather than Liberal Democrat ministers.

Downing Street aides insisted there is "no wobble" despite criticism from economists and Labour that the economy is "flatlining" because the Government is going "too far, too fast" on spending cuts. The minister added: "We will stay the course. It is still early days."

On Wednesday the Organisation for Economic Co-operation and Development (OECD) downgraded its forecast for UK economic growth this year from 1.5 to 1.4 per cent and lowered next year's forecast from 2 to 1.8 per cent – lower than the Office for Budget Responsibility's predictions of 1.7 per cent for this year and 2.5 per cent for next year.

Weak growth of 0.5 per cent in the first three months of this year has also raised fears among cabinet ministers that the Conservatives and Liberal Democrats may receive little credit from voters at the next general election unless the recovery is stronger. Eric Pickles, the Communities Secretary, told students at the Cambridge Union this week that the electoral fate of both Coalition parties rested on "whether or not our economic policy works". He added: "If our economic policy doesn't work, then we're both in a great deal of trouble."

Ministerial fears will be enhanced by a think-tank study today suggesting that low- and middle-income earners may not reap the benefit from the recovery by the planned date of the next election. The Resolution Foundation predicted that average pay by 2015 would be no higher than in 2001.

It warned that a combination of stagnated wages, high levels of personal debt and a declining share of "middle skilled" jobs would put pressure on living standards, along with tax credit cuts. It found that the living standards of people on low and middle incomes were already faltering before the recession. Between 2003 and 2008, median wages flatlined and disposable income per head fell in every English region outside London despite economic growth. James Plunkett, the report's author, said: "We all know that the recession has hit living standards hard. But something deeper has changed in our economy. Even during the boom years, ordinary workers weren't seeing their living standards rise. The big question now is what will happen when growth resumes. Will ordinary workers reap any of the benefits? It is far from certain."

Yesterday a survey by Ipsos MORI found that two in five people (43 per cent) believe that if the economy improves in the next year, the public would think it will be down to the state of the global economy, while only a third (35 per cent) would believe the coalition parties were responsible. However, if the economy were to get worse over the next 12 months, the Coalition, the previous Labour government, the banks and the global economy would all share the blame. At present, 42 per cent predict that the economy will get worse in the next year.

Ed Balls, the shadow Chancellor, said: "George Osborne's rigid determination, despite all the evidence, to stick with deep and fast cuts and refuse to even consider a Plan B does not boost his credibility, it undermines it."

Start your day with The Independent, sign up for daily news emails
Have you tried new the Independent Digital Edition apps?
ebooks
ebooksA celebration of British elections
  • Get to the point
2015 General Election
May2015

Poll of Polls

Latest stories from i100
Have you tried new the Independent Digital Edition apps?
Independent Dating
and  

By clicking 'Search' you
are agreeing to our
Terms of Use.

iJobs Job Widget
iJobs General

Ashdown Group: Trainee Consultant - Surrey/ South West London

£22000 per annum + pension,bonus,career progression: Ashdown Group: An establi...

Ashdown Group: Trainee Consultant - Surrey / South West London

£22000 per annum + pension,bonus,career progression: Ashdown Group: An establi...

Ashdown Group: Recruitment Consultant / Account Manager - Surrey / SW London

£40000 per annum + realistic targets: Ashdown Group: A thriving recruitment co...

Ashdown Group: Part-time Payroll Officer - Yorkshire - Professional Services

£25000 per annum: Ashdown Group: A successful professional services firm is lo...

Day In a Page

Fishing for votes with Nigel Farage: The Ukip leader shows how he can work an audience as he casts his line to the disaffected of Grimsby

Fishing is on Nigel Farage's mind

Ukip leader casts a line to the disaffected
Who is bombing whom in the Middle East? It's amazing they don't all hit each other

Who is bombing whom in the Middle East?

Robert Fisk untangles the countries and factions
China's influence on fashion: At the top of the game both creatively and commercially

China's influence on fashion

At the top of the game both creatively and commercially
Lord O’Donnell: Former cabinet secretary on the election and life away from the levers of power

The man known as GOD has a reputation for getting the job done

Lord O'Donnell's three principles of rule
Rainbow shades: It's all bright on the night

Rainbow shades

It's all bright on the night
'It was first time I had ever tasted chocolate. I kept a piece, and when Amsterdam was liberated, I gave it to the first Allied soldier I saw'

Bread from heaven

Dutch survivors thank RAF for World War II drop that saved millions
Britain will be 'run for the wealthy and powerful' if Tories retain power - Labour

How 'the Axe' helped Labour

UK will be 'run for the wealthy and powerful' if Tories retain power
Rare and exclusive video shows the horrific price paid by activists for challenging the rule of jihadist extremists in Syria

The price to be paid for challenging the rule of extremists

A revolution now 'consuming its own children'
Welcome to the world of Megagames

Welcome to the world of Megagames

300 players take part in Watch the Skies! board game in London
'Nymphomaniac' actress reveals what it was really like to star in one of the most explicit films ever

Charlotte Gainsbourg on 'Nymphomaniac'

Starring in one of the most explicit films ever
Robert Fisk in Abu Dhabi: The Emirates' out-of-sight migrant workers helping to build the dream projects of its rulers

Robert Fisk in Abu Dhabi

The Emirates' out-of-sight migrant workers helping to build the dream projects of its rulers
Vince Cable interview: Charging fees for employment tribunals was 'a very bad move'

Vince Cable exclusive interview

Charging fees for employment tribunals was 'a very bad move'
Iwan Rheon interview: Game of Thrones star returns to his Welsh roots to record debut album

Iwan Rheon is returning to his Welsh roots

Rheon is best known for his role as the Bastard of Bolton. It's gruelling playing a sadistic torturer, he tells Craig McLean, but it hasn't stopped him recording an album of Welsh psychedelia
Morne Hardenberg interview: Cameraman for BBC's upcoming show Shark on filming the ocean's most dangerous predator

It's time for my close-up

Meet the man who films great whites for a living
Increasing numbers of homeless people in America keep their mobile phones on the streets

Homeless people keep mobile phones

A homeless person with a smartphone is a common sight in the US. And that's creating a network where the 'hobo' community can share information - and fight stigma - like never before