Austerity measures extended in Autumn Statement
Chancellor George Osborne is extending the government’s austerity measures until 2018, a year longer than expected, after the Office for Budget Responsibility revised down its forecast for economic growth.
Last year, the OBR was optimistic that the economy would grow by 0.8 per cent this year, but it now expects it to contract by 0.1 per cent, partly due to continuing problems in the euro zone.
The OBR has revised its forecast for next year from 2 per cent growth to just 1.2 per cent growth.
The OBR was established by the Chancellor in 2010 to provide the Treasury with independent forecasts, but it has been criticised for continuing to produce over-optimistic figures.
In his Autumn Statement the Chancellor revealed that he would not achieve his target to have debt falling by 2015-16 as a percentage of national income.
It is now expected to take until 2016-17 for debt to start to fall.
Speaking to the House of Commons, Mr Osborne said: “The public know that there are no miracle cures.
“Just the hard work of dealing with our deficit and ensuring Britain wins the global race.
“The message from today’s Autumn Statement is that we are making progress.
“It is a hard road but we’re getting there and Britain is on the right track and turning back now would be a disaster.”
Mr Osborne also announced that benefits would increase by just 1 per cent next year for the next three years, a substantial drop from the expected increase of 2.2 per cent in 2013-14.
The move will save the Treasury £3.7bn a year by 2015-16.
On a more positive note, a planned 3p increase in fuel duty has been cancelled and the personal tax allowance will be increased to £9,440 from next April, a larger increase than planned.
The latest purchasing managers’ index (PMI) survey from Markit also brought bad news on the economy.
An unexpected slowdown in the services sector caused November’s survey to fall to a 23-month low of 50.2, down from 50.6 in October.
A reading below 50 indicates economic contraction.
The figures have raised concern that Britain could be heading for a ‘triple-dip’ recession.