George Osborne: UK economy is turning a corner
George Osborne says austerity measures pursued by the government are leading to economic recovery, while Labour argues that ordinary families have been left worse off.
Treasury officials believe the economy has entered the “next phase” of recovery – only months after economists feared the UK was set to plunge into an unprecedented triple-dip recession.
The chancellor on Monday hailed “tentative signs of a balanced, broad based and sustainable recovery”.
He insisted that the last few months – which have seen growth forecasts revised upwards amid a number of positive indicators – had “decisively ended” questions about his deficit reduction strategy.
‘Held our nerve’
The cost of living – to which Labour has switched the focus of attacks on the government – would have risen higher still if the coalition had not stuck to its austerity measures, he said.
Mr Osborne said: “The economic collapse was even worse than we thought. Repairing it will take even longer than we hoped.
“But we held our nerve when many told us to abandon our plan. And as a result, thanks to the efforts and sacrifices of the British people, Britain is turning a corner.
“Many risks remain. These are still the early stages of recovery. But we mustn’t go back to square one. We mustn’t lose what the British people have achieved.
“This is a hard, difficult road we have been following. But it is the only way to deliver a sustained, lasting improvement in the living standards of the British people.”
Thanks to the efforts and sacrifices of the British people, Britain is turning a corner – George Osborne
Mr Osborne has been forced to extend austerity measures well beyond the 2015 general election as a result of the sluggish economy.
But the chancellor insisted that borrowing more to boost spending would have “undermined” recovery and the impact on living standards “would have been much harsher”.
“Those in favour of a plan B have lost the argument” because they can’t now explain the recovery, he said.
The chancellor also rejected claims that he has encouraged “the wrong sort of growth” – led by debt-fuelled consumption – insisting all the data points to a much broader-based improvement.
“Our economic plan is the right response to Britain’s macroeconomic imbalances and the evidence shows that it is working,” he said.
‘Ordinary families worse off’
Labour accused the chancellor of a “desperate attempt to rewrite history”.
Shadow Treasury minister Chris Leslie said: “Three wasted years of flatlining under George Osborne have left ordinary families worse off and caused long-term damage to our economy.”
“This desperate attempt to rewrite history will not wash when on every test he set himself, this chancellor’s plan A has badly failed – on living standards, growth and the deficit.”
Labour leader Ed Miliband is expected to use his speech to the TUC conference to criticise the chancellor for being “out of touch with ordinary families” by celebrating while they face the squeeze.
Read more: UK 'holding its nerve' with 0.6 per cent growth
Mr Osborne has been buoyed by revised gross domestic product figures showing the UK economy grew by 0.7 per cent in the second quarter of the year, with predictions it could reach 1 per cent for the third quarter.
The respected OECD think-tank has almost doubled its prediction for UK growth this year to 1.5 per cent.
Rising property prices and a summer retail splurge as well as booming car sales have also contributed to the feel-good factor, with surging manufacturing figures for June also helping fuel the improved mood.
Goods exports excluding oil plunged however by 9.3 per cent, and the overall trade deficit more than doubled from £1.3bn to £3.1bn, with real terms wages also in decline.
The economy remains 3 per cent below its pre-crisis level.
