Government will not change economic course, says Osborne

7 Sep 11
Worries about a double-dip recession will not deflect the government from its austerity programme, Chancellor George Osborne has said.

By Mark Smulian | 7 September 2011

Worries about a double-dip recession will not deflect the government from its austerity programme, Chancellor George Osborne has said.

Addressing Lloyds of London’s Annual City Dinner last night, he gave no hope to those who want public spending cuts slowed or reversed, but admitted that economic growth would be ‘choppy’.

He said: ‘This is not a normal economic recovery. We cannot just sit back and wait for numbers that went down to come back up, or for lost ground to be made up, as has happened many times in the past.’

The chancellor said the debt-based economic growth model of the past few decades was ‘badly broken’, particularly in the UK where ‘our debt burden [is] one of the biggest, and the necessary re-adjustment correspondingly difficult’.

Osborne explained: ‘We understood right from the beginning that the world of the boom years had changed beyond recognition.

‘We identified the problems and the risks – an overleveraged economy, an unsustainable budget deficit and a broken model of growth. We warned repeatedly that the recovery would be choppy.’

Ministers have sought to bring government borrowing under control, to keep interest rates low. Osborne described this approach as ‘the rock of stability upon which any sustainable recovery depends, and we will hold to it’.

Despite the publicity given to debt problems in Italy, Spain and Portugal, the UK debt was in fact higher and so ‘we must stick to our deficit reduction plan’, the chancellor said.

‘For an economy with a financial sector as big as ours, the potential for negative feedback loops from sovereign risk to financial risk and back again makes fiscal credibility even more vital.’

He also took a swipe at the increasingly loud opposition to the government’s planning reforms, which it says are designed to encourage growth through property and residential development.

‘I need your support against the vested interests who will oppose us almost every step of the way,’ he told his audience.

Osborne said the local planning system was a fundamental problem in raising growth and criticised those who support development only when it does not affect them personally.

‘Let me put it this way – nobody should campaign for a new underground railway here in London but against a high-speed overground one outside London.’

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