Budget 2013: Ed Balls urges George Osborne to 'U-turn' on economy

Ed Balls: "On every measure, compared to what they said they would do, they've failed".

Shadow chancellor Ed Balls has urged George Osborne to make a swift economic "U-turn", after growth forecasts for 2013 were halved to 0.6% in the Budget.

Mr Balls said government policies had "sucked confidence" out of the economy and the plan was not working.

During the two men's tour of media outlets after the Budget, Mr Osborne defended his economic package.

He insisted his strategy was working, saying "we have to go on confronting these problems" and cutting debt.

Budget announcements included freezing petrol duty rises, a cut in corporation tax to 20% in 2015, cancelling future automatic beer duty rises and measures to boost the housing market.

Mr Osborne defended the government's plan to effectively guarantee £130bn worth of new mortgages as a "big new step" that was needed because the mortgage market was "not functioning properly".

Pressed on whether the Help to Buy scheme - which would underwrite loans for people able to put down a deposit of between 5% and 20% - would be restricted to first-time buyers or may be open to people who wanted to buy second homes, the chancellor said he would consult with lenders on the details.

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City experts were predicting borrowing would rise a lot more than this. How did the chancellor avoid this fate?”

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"The mortgage market is an extremely complex thing," he told BBC Radio 4's Today Programme. "The intention of the scheme is absolutely clear - it is for people who want to get their first home or have a home and want to move to a bigger home because perhaps they have got a bigger family.

"We are working with the industry to get a scheme that works."

Some commentators have said the scheme - to be limited to house purchases worth less than £600,000 - could simply inflate prices further, while Labour says it does not address the fundamental lack of confidence among would-be purchasers.

The Bank of England would be able "to turn off the tap" on new mortgage finance after three years if the market was over-heating, Mr Osborne added, insisting that this was an important element of the plan's "fiscal credibility".

Growth forecasts for 2013 were halved to 0.6% on Wednesday while figures from the Office for Budget Responsibility suggest the government's efforts to cut the deficit - the difference between money spent and earned in a year - have stalled and it will remain stuck at about £120bn for three years.

'Borrowing for failure'

Ahead of the Budget debate resuming in the Commons on Thursday, Mr Balls told the BBC that while there were some "good things" in the Budget, it had shown "in even more vivid detail than before... that the plan's not working - the economy is not growing".

He added: "If you're a chancellor, if you made a mistake, do your U-turn quickly. The longer you wait, the worse it gets, and the harder it becomes politically, even if economically it's the right thing."

George Osborne: "We're on the side of people who are trying to work hard... to raise their kids in the right way"

He later told MPs there had been no growth in the economy in the past year, living standards were continuing to fall and the chancellor was set to borrow £245bn more than he originally planned.

"It is a Groundhog Day Budget from a failing and out-of-touch chancellor," he said. "The only reason he will not change course is to avoid his own political humiliation."

Mr Osborne said the public understood progress was being made on the public finances and job creation, despite the difficult economic conditions.

But he added: "We have not made as much progress as anyone, including myself, would have liked because the environment we are operating in has got much more difficult."

Using an analogy of scaling a mountain, he said: "We can see where we need to get to but the weather has got worse."

Citing initiatives on mortgage finance, childcare and raising the income tax threshold to £10,000 a year earlier than planned in 2014, Lib Dem leader and deputy prime minister Nick Clegg said the government had "displayed a real willingness" to help people in tough times.

Speaking on his weekly phone-in on LBC's 97.3 FM, he said ministers could not "wave a magic wand" but they had taken "the most reasonable steps" possible at a time when there was little money around, continuing instability in the eurozone and the UK economy was still recovering from the legacy of the 2008 financial crisis.

'Miserable Budget'

The chancellor ignored pre-Budget calls by Business Secretary Vince Cable and others to borrow more to boost growth with a big building programme.

But he did announce £2.5bn of spending on infrastructure paid for by a fresh public spending squeeze. Details of where the axe will fall will be announced in June when the government unveils its spending review.

Budget documents

Budget 2013 graphic

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Meanwhile, after the Evening Standard tweeted details of the Budget before Mr Osborne had delivered it, the chancellor has asked his top official to conduct a review of the practice of releasing Budget information in advance of the speech.

And Speaker John Bercow, who accepted apologies from the newspaper, has asked the chancellor to explain why the details of the Budget were pre-briefed to the newspaper.

The Scottish National Party described Mr Osborne's statement as a "miserable Budget" which "just continues along the austerity path that is clearly failing". Plaid Cymru said the £2.5bn in infrastructure spending was just a "fraction" of what was actually needed.

Green Party MP Caroline Lucas said it was "yet another Budget that treats the public with contempt, continuing to peddle the myth that our national debt and deficit increased due to excessive public spending rather than bank bailouts".

UKIP leader Nigel Farage dismissed Mr Osborne's statement as a "Budget for headline writers" that failed to tackle "the serious problems in our economy".

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