Global financial chaos 'vindicates' coalition cuts, says Osborne

12 Aug 11
The current turmoil in the global financial markets has 'vindicated' the government's decisions over spending cuts, Chancellor George Osborne said yesterday.

By Lucy Phillips | 12 August 2011

The current turmoil in the global financial markets has ‘vindicated’ the government’s decisions over spending cuts, Chancellor George Osborne said yesterday.  

He made a statement to the Commons last night following the debate by MPs on this week's riots. Parliament was recalled for a day during the summer recess because of the violence of recent days.

He said: ‘I believe that events around the world completely vindicate the decisions of this coalition government from the day it took office to get ahead of the curve and deal with this country’s record deficit.

‘While other countries wrestled with paralysed political systems, our coalition government united behind the swift and decisive action of in-year cuts and the Emergency Budget.’

The government had made an ‘absolutely unwavering commitment to fiscal responsibility and deficit reduction’, he said. ‘Abandoning that commitment would plunge Britain into the financial whirlpool of a sovereign debt crisis, at the cost of many thousands of jobs.’

Osborne claimed Britain had become a ‘safe haven’ in the sovereign debt storm that was gripping the world’s markets. UK gilt yields had come down to about 2.5% – the lowest rates in over 100 years – and the price of insuring against a sovereign default was now lower than Germany’s, he said. 

He told the Commons: ‘This is a huge vote of confidence in the credibility of British government debt and a major source of stability for the British economy at a time of exceptional instability.

‘And it is a reminder of the reckless folly of those who said we were going too far, too fast. We can all see now that their approach would have been too little, too late – with disastrous consequences for Britain.’

But as he warned that he world was facing the ‘most dangerous time for the global economy’ since the 2008 financial crisis, he conceded that the UK recovery would ‘take longer and be harder than had been hoped’.

On Thursday the Bank of England downgraded its forecast for growth in 2011 from 1.8% to 1.5%.

Shadow chancellor Ed Balls said the chancellor was either ‘deeply complacent or in complete denial’.

He insisted that the government’s cuts went ‘too far and too fast’, adding: ‘However many times he says his plans are working, it doesn’t make it true.’

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