Squeeze on as George Osborne misses target
3:00pm Wednesday 5th December 2012 in News
George Osborne has announced a benefits squeeze and a raid on the pensions of the wealthy as the economy continues to falter.
In a bleak Autumn Statement, the Chancellor said that weakening economic growth meant the era of austerity would be extended for another year to 2018, well into the next parliament.
He sought to sweeten the pill, scrapping a planned 3p-a-litre rise in fuel duty which had been due to come in January.
However, he was also forced to admit that the independent Office for Budget Responsibility now believed he would miss his target for debt to start falling as a proportion of GDP from 2015/16 - the year of the next general election.
Labour seized on the forecast, claiming it revealed the "true scale of this Government's economic failure". Shadow chancellor Ed Balls claimed the UK was "falling behind in the global race" as a result of Mr Osborne's management of the economy.
Mr Osborne told MPs: "It's taking time, but the British economy is healing."
He acknowledged that previous growth predictions were wrong, but he pledged to continue efforts to drive down the deficit. Quoting the latest Office for Budget Responsibility growth forecast, Mr Osborne said the economy was now expected to shrink by 0.1% this year compared with a previous prediction of 0.8% growth.
Setting out spending plans for 2015-16 and a framework into 2017-18, he said deficit reduction measures would be achieved fairly with further savings from bureaucracy, from benefit bills and the better-off. He hailed a reduction in borrowing, saying it was forecast to fall from £108 billion this year to £99 billion next year, £88 billion the year after, then £73 billion in 2015-16 and £49 billion and £31 billion in the two years after that.
He admitted he was going to miss his target that debt should start falling as a proportion of GDP by 2015/16 - the year of the next general election. Instead he said it would take another year. He said the OBR's central forecast is that net debt will be 74.7% this year, then 76.8% next year, 79% in 2014-15 and 79.9% in 2015-16. It will then fall to 79.2% in 2016-17 and 77.3% in 2017-18.
He told MPs: "Yes, the deficit is still far too high for comfort. We cannot relax our efforts to make our economy safe. But Britain is heading in the right direction. The road is hard but we're making progress."
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