Chancellor says UK facing very difficult times
Chancellor of the Exchequer George Osborne admitted this afternoon that the government will not meet its Budget forecasts for UK economic growth and borrowing.
In his Autumn Statement, Mr Osborne reduced forecasts for UK growth to 0.9% this year, 0.7% next year and 2.1% in 2013.
In March’s Budget the independent Office for Budget Responsibility estimated that the UK economy would grow by 1.7% in 2011 and 2.5% in 2012.
Mr Osborne also said that although borrowing was falling, this was not happening as quickly as expected because of the ongoing eurozone crisis.
As a result of lower than expected economic growth, borrowing is expected to be £5 billion more this year than originally forecast, £19 billion more than expected next year and £30 billion higher than anticipated in 2013-14.
Following yesterday’s predictions by the OECD of a second global economic crisis, the Chancellor promised to guide the UK through the impending ‘storm’ of a double-dip recession and said he would push forward with his plans.
He announced a number of new measures including a 1 per cent cap on public sector pay rises after the current pay freeze ends next year.
The Office for Budget Responsibility has increased its forecast for total public sector job losses to 710,000, from a previous estimate of 400,000.
As the OECD warned of the possibility of a double-dip recession, the governor of the Bank of England, Sir Mervyn King, said the UK’s banking system could fail if the debt crisis in the Eurozone spreads to other countries.
In his annual report, Sir Mervyn said: “The unfolding euro-area crisis and the associated tensions in financial markets and the world economy now threaten the UK recovery.”
“Over the past quarter I think all banks have become less safe because our banking system is exposed to the euro area,” he said.