Chancellor warns of tough and long recovery ahead
Speaking in the House of Commons today, Chancellor George Osborne has warned that the UK can expect a long and tough recovery.
His speech came as he defended the Government’s tough spending cuts, which many have been critical about – even suggesting they could push the UK back into recession.
However, the Chancellor believes that the “swift, decisive” spending cuts and emergency budget had reassured markets that the UK could cope with its debt.
He said: “These bold steps have made Britain this safe haven in a sovereign debt storm.”
Meanwhile, the Chancellor expressed his concern about the ongoing debt problems in the euro zone. As a result of the debt crisis, banking shares have dived while the FTSE has lost 16% of its value in the last few weeks.
However, the Chancellor said there are contingency plans in place to ensure UK banks can cope with the crisis.
He said: “I can confirm that the assessment of the Bank [of England], the [Financial Services Authority] and the Treasury is that British banks are sufficiently well capitalised and are holding enough liquidity to be able to cope with the current market turbulence.
“We have in place well-developed and well-rehearsed contingency plans.”
The speech came just one day after the Bank of England revised its growth forecast for the economy from 1.8% to 1.5%.
The central bank warned that “the headwinds are growing stronger by the day” and added that inflation could hit 5% this year – way above its 2% target.