The Government will stick to its deficit reduction programme despite growth figures being revised downwards not only in Britain, but globally.
The independent Office for Budget Responsibility (OBR) believes the UK economy will grow by 1.7% in 2011; however, most economists believe that the growth will actually be lower than estimated. The recent GDP performance of the UK economy shows growth of only 0.7% in the first six months of this year.
Downing Street and the Treasury have been under considerable pressure to change the government’s policy to implement unprecedented spending cuts over the life of this Parliament.
IMF Chief Christine Lagarde has called for governments around the globe to ease off the austerity measures and focus on policies that drive growth, and Shadow Chancellor Ed Balls and the Labour party have been arguing for a similar shift since last year.
The Chancellor yesterday acknowledged that growth this year would not be what the government hoped; however, he told MPs there was no way countries would achieve growth by ‘yet another fix of the debt-fuelled spending bubble that got us into the mess we are in at the moment’. He also informed the House of Commons that the government would take this message to the upcoming G7 meeting, where Mr. Osborne is scheduled to meet Ms Lagarde.
Speaking at an event in London, the Chancellor said the government has repeatedly pointed out that the economic recovery would be ‘choppy’ and the latest figures come as no surprise.