George Osborne ‘out of touch’ on economic growth, says Labour

Shadow treasury minister David Hanson seizes on admission by OBR that UK now unlikely to meet growth forecast of 1.7% Labour has seized on an admission by the head of the Office for Budget Responsibility of Britain’s slow economic growth to make a renewed attack on the chancellor, George Osborne, for being “out of touch”. Robert Chote, the OBR chief, said the British economy was now unlikely to meet his office’s growth forecast, already downgraded thrice, of 1.7 % for this year. David Hanson, the shadow treasury minister, said: “The government’s independent budget watchdog has now admitted what our complacent and out-of-touch chancellor refuses to acknowledge. “It’s now increasingly likely that the government will miss its growth forecasts for 2011 which is bad news for families and businesses and will put the government’s borrowing targets this year at serious risk. “Osborne must now recognise that his tax rises and spending cuts which go too far and too fast have choked off last year’s recovery.” Although the OBR is independent of the government, it is unusual for the office to admit that the growth forecast will be downgraded in advance of its official publication date. The OBR will give its latest forecast in the autumn statement probably in November, by which time the third-quarter growth figures will have been published. Speaking to the Independent, Chote said: “As a simple matter of arithmetic, in order to get to 1.7% now you’d be looking for quarter-on-quarter growth rates of 1% in the second and third quarters of 2011, and there aren’t many people out there expecting that.” He added: “Looking forward to the next quarter, in the March forecast we had 0.5% for the third quarter. Now there are various indicators saying the third quarter will be relatively weak, but on the other hand there were special factors in the second quarter so there may be bounce-back there. There are potential pressures in both directions.” Chote was sceptical that the cut in growth will necessarily mean the government will not meet its borrowing forecasts. He said: “If you do have a combination of somewhat weaker growth and higher inflation, that potentially may explain why you haven’t seen much impact of weaker output growth on tax revenues and on public finances, but it’s very early in the financial year to take a view on that.” There have been signs that public finances have held up better than expected. Chote also said he would be publishing the “blue book” of national statistics later in the year, which will tell the UK much more about what happened in the recession and the size of the structural deficit, the target identified by the chancellor. The smaller the output gap, the larger the structural element of the deficit and the harder the task facing Osborne. “It’s the old joke about the past being more difficult to predict than the future,” the OBR chief said. His warning comes ahead of the Bank of England’s interest rate announcement on Thursday. The monetary policy committee will also decide whether the worsening economic outlook requires a fresh round of quantitative, or monetary, easing. The business secretary, Vince Cable, has been pushing for a fresh round of easing, but the chancellor is not willing to be seen to be interfering with the independence of the bank, although he and the prime minister have preached the virtues of monetary activism. George Osborne Government borrowing Labour Economic growth (GDP) Economics Economic policy Conservative and Liberal Democrat cabinet Conservatives Liberal Democrats Liberal-Conservative coalition Office for Budget Responsibility Budget deficit Patrick Wintour guardian.co.uk

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