George Osborne: Changing course on economy will take Britain 'back to square one'

Chancellor tells CBI's annual dinner that his economic plan is 'taking longer than anyone hoped,' but insisted real progress is being made

George Osborne has warned that changing course on the economy would take Britain “back to square one” as he insisted that his strategy is working.

The Chancellor told the CBI's annual dinner in London: “Now is not the time to lose our nerve. Let's not listen to those who would take us back to square one. Let's carry on doing what is right for Britain. Let's see this through.”

Mr Osborne admitted that his economic plan is “taking longer than anyone hoped” but insisted that Britain had made real progress, such as creating 2m private sector jobs.

He launched a strong attack on Labour's plan to spend more in the short term to boost growth, describing its “ludicrous” policy as: “We would borrow more to borrow less.” He argued that  Labour's claim that a temporary VAT cut would eventually reduce borrowing “simply doesn't stack up.”

Mr Osborne said: “Are those advocating looser fiscal policy really suggesting we should set out to increase our deficit year on year when it is still larger than when Britain went to the International Monetary Fund (IMF) in 1976 and one of the highest in the western world today?  If financial markets sensed that the UK was going to print its way out of trouble, the response in the markets would be catastrophic. The people who would pay the price are the millions employed by the companies represented in this room and the millions of families who would face higher mortgage rates.”

Although his message was mainly for his business hosts, the Chancellor also had one for the IMF team now in London for its annual “health check” on the UK economy, who may call for the pace of his spending cuts to be slowed. He said: “The most recent economic news has been more encouraging. The economy is growing. Surveys are better. Confidence is returning to financial markets.”

Mr Osborne argued that the pace of the cuts in the UK was “in the middle of the pack” internationally. He said the Government  had shown flexibility in implementing the deficit-reduction programme, which explained why the deficit was only just starting to fall.

“We are reducing the structural deficit by about 1 per cent of GDP a year - in line with other developed economies, and less than the United States,” he said. “So we will stick with our approach, which has seen the deficit cut by a third.”

He added: “Just as the argument for fiscal stimulus three years ago was mistaken, so is the suggestion for a discretionary fiscal loosening now.”

Chris Leslie, a Labour Treasury spokesman, said: “George Osborne is in total denial about the failure of his economic plan. He has now delivered the slowest recovery for 100 years, falling living standards and rising unemployment. And borrowing is set to be £245 billion more than planned to pay for the costs of this economic failure.

“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 kickstart our economy now and reforms to strengthen it for the long-term.”

Start your day with The Independent, sign up for daily news emails
Have you tried new the Independent Digital Edition apps?
ebooks
ebooksA special investigation by Andy McSmith
  • 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

Recruitment Genius: Customer Service Executive

£18000 - £22000 per annum: Recruitment Genius: This is an exciting opportunity...

Recruitment Genius: Retail Buyer / Ecommerce Buyer

£30000 - £35000 per annum: Recruitment Genius: Working closely with the market...

Recruitment Genius: Sales Executive - CAD Software Solutions Sales

£20000 - £50000 per annum: Recruitment Genius: A reputable company, famed for ...

Ashdown Group: Client Accountant Team Manager - Reading

Negotiable: Ashdown Group: The Ashdown Group has been engaged by a highly resp...

Day In a Page

War with Isis: Iraq declares victory in the battle for Tikrit - but militants make make ominous advances in neighbouring Syria's capital

War with Isis

Iraq declares victory in the battle for Tikrit - but militants make make ominous advances in neighbouring Syria
Scientists develop mechanical spring-loaded leg brace to improve walking

A spring in your step?

Scientists develop mechanical leg brace to help take a load off
Peter Ackroyd on Alfred Hitchcock: How London shaped the director's art and obsessions

Peter Ackroyd on Alfred Hitchcock

Ackroyd has devoted his literary career to chronicling the capital and its characters. He tells John Walsh why he chose the master of suspense as his latest subject
Ryan Reynolds interview: The actor is branching out with Nazi art-theft drama Woman in Gold

Ryan Reynolds branches out in Woman in Gold

For every box-office smash in Ryan Reynolds' Hollywood career, there's always been a misconceived let-down. It's time for a rethink and a reboot, the actor tells James Mottram
Why Robin Williams safeguarded himself against a morbid trend in advertising

Stars safeguard against morbid advertising

As film-makers and advertisers make increasing posthumous use of celebrities' images, some stars are finding new ways of ensuring that they rest in peace
The UK horticulture industry is facing a skills crisis - but Great Dixter aims to change all that

UK horticulture industry facing skills crisis

Great Dixter manor house in East Sussex is encouraging people to work in the industry by offering three scholarships a year to students, as well as generous placements
Hack Circus aims to turn the rule-abiding approach of TED talks on its head

Hack Circus: Technology, art and learning

Hack Circus aims to turn the rule-abiding approach of TED talks on its head. Rhodri Marsden meets mistress of ceremonies Leila Johnston
Sevenoaks is split over much-delayed decision on controversial grammar school annexe

Sevenoaks split over grammar school annexe

If Weald of Kent Grammar School is given the go-ahead for an annexe in leafy Sevenoaks, it will be the first selective state school to open in 50 years
10 best compact cameras

A look through the lens: 10 best compact cameras

If your smartphone won’t quite cut it, it’s time to invest in a new portable gadget
Paul Scholes column: Ross Barkley played well against Italy but he must build on that. His time to step up and seize that England No 10 shirt is now

Paul Scholes column

Ross Barkley played well against Italy but he must build on that. His time to step up and seize that England No 10 shirt is now
Why Michael Carrick is still proving an enigma for England

Why Carrick is still proving an enigma for England

Manchester United's talented midfielder has played international football for almost 14 years yet, frustratingly, has won only 32 caps, says Sam Wallace
Tracey Neville: The netball coach who is just as busy as her brothers, Gary and Phil

Tracey Neville is just as busy as her brothers, Gary and Phil

The former player on how she is finding time to coach both Manchester Thunder in the Superleague and England in this year's World Cup
General Election 2015: The masterminds behind the scenes

The masterminds behind the election

How do you get your party leader to embrace a message and then stick to it? By employing these people
Machine Gun America: The amusement park where teenagers go to shoot a huge range of automatic weapons

Machine Gun America

The amusement park where teenagers go to shoot a huge range of automatic weapons
The ethics of pet food: Why are we are so selective in how we show animals our love?

The ethics of pet food

Why are we are so selective in how we show animals our love?