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

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

iJobs Job Widget
iJobs General

Recruitment Genius: Senior Environmental Adviser - Maternity Cover

£37040 - £43600 per annum: Recruitment Genius: The UK's export credit agency a...

Recruitment Genius: CBM & Lubrication Technician

£25000 - £27500 per annum: Recruitment Genius: This company provides a compreh...

Recruitment Genius: Care Worker - Residential Emergency Service

£16800 - £19500 per annum: Recruitment Genius: Would you like to join an organ...

Recruitment Genius: Senior Landscaper

£25000 - £28000 per annum: Recruitment Genius: In the last five years this com...

Day In a Page

Refugee crisis: David Cameron lowered the flag for the dead king of Saudi Arabia - will he do the same honour for little Aylan Kurdi?

Cameron lowered the flag for the dead king of Saudi Arabia...

But will he do the same honour for little Aylan Kurdi, asks Robert Fisk
Our leaders lack courage in this refugee crisis. We are shamed by our European neighbours

Our leaders lack courage in this refugee crisis. We are shamed by our European neighbours

Humanity must be at the heart of politics, says Jeremy Corbyn
Joe Biden's 'tease tour': Could the US Vice-President be testing the water for a presidential run?

Joe Biden's 'tease tour'

Could the US Vice-President be testing the water for a presidential run?
Britain's 24-hour culture: With the 'leisured society' a distant dream we're working longer and less regular hours than ever

Britain's 24-hour culture

With the 'leisured society' a distant dream we're working longer and less regular hours than ever
Diplomacy board game: Treachery is the way to win - which makes it just like the real thing

The addictive nature of Diplomacy

Bullying, betrayal, aggression – it may be just a board game, but the family that plays Diplomacy may never look at each other in the same way again
Lady Chatterley's Lover: Racy underwear for fans of DH Lawrence's equally racy tome

Fashion: Ooh, Lady Chatterley!

Take inspiration from DH Lawrence's racy tome with equally racy underwear
8 best children's clocks

Tick-tock: 8 best children's clocks

Whether you’re teaching them to tell the time or putting the finishing touches to a nursery, there’s a ticker for that
Charlie Austin: Queens Park Rangers striker says ‘If the move is not right, I’m not going’

Charlie Austin: ‘If the move is not right, I’m not going’

After hitting 18 goals in the Premier League last season, the QPR striker was the great non-deal of transfer deadline day. But he says he'd preferred another shot at promotion
Isis profits from destruction of antiquities by selling relics to dealers - and then blowing up the buildings they come from to conceal the evidence of looting

How Isis profits from destruction of antiquities

Robert Fisk on the terrorist group's manipulation of the market to increase the price of artefacts
Labour leadership: Andy Burnham urges Jeremy Corbyn voters to think again in last-minute plea

'If we lose touch we’ll end up with two decades of the Tories'

In an exclusive interview, Andy Burnham urges Jeremy Corbyn voters to think again in last-minute plea
Tunisia fears its Arab Spring could be reversed as the new regime becomes as intolerant of dissent as its predecessor

The Arab Spring reversed

Tunisian protesters fear that a new law will whitewash corrupt businessmen and officials, but they are finding that the new regime is becoming as intolerant of dissent as its predecessor
King Arthur: Legendary figure was real and lived most of his life in Strathclyde, academic claims

Academic claims King Arthur was real - and reveals where he lived

Dr Andrew Breeze says the legendary figure did exist – but was a general, not a king
Who is Oliver Bonas and how has he captured middle-class hearts?

Who is Oliver Bonas?

It's the first high-street store to pay its staff the living wage, and it saw out the recession in style
Earth has 'lost more than half its trees' since humans first started cutting them down

Axe-wielding Man fells half the world’s trees – leaving us just 422 each

However, the number of trees may be eight times higher than previously thought
60 years of Scalextric: Model cars are now stuffed with as much tech as real ones

60 years of Scalextric

Model cars are now stuffed with as much tech as real ones