UK Politics

Budget 2011: Osborne says 'huge mistake' to slow cuts

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Media captionOsborne: No more cuts, no more tax increases

George Osborne has said it would be "a huge mistake" for the government to water down its spending cuts as he prepares to deliver his second Budget.

The chancellor told the BBC deficit-cutting measures announced last year had helped "rescue" the economy.

Despite weak growth and rising unemployment, he vowed not to change course, but pledged "far-reaching" reforms to boost jobs and skills.

Labour say he should "show humility" and admit his policy "will not work".

In his second Budget, Mr Osborne will announce the Office for Budget Responsibility's (OBR) latest forecasts for growth in the economy this year and the state of the public finances.

Economists expect the OBR to downgrade forecasts for growth in 2011 - after figures showed a 0.6% contraction in the last three months of 2010.

However, they also believe borrowing figures will not be as high as previously anticipated - up to £10bn lower than the £158bn predicted in June's emergency Budget.

'Rescue to recovery'

Mr Osborne said the UK still had the highest budget deficit of any major country in the world.

He argued it was was only the substantial spending cuts and tax rises announced in June and in October's Spending Review - many of which will come into effect in April - which had "stabilised" the economy and enabled it to map a path for recovery.

"We have taken Britain out of the fiscal danger zone. Now we have to move from rescue to recovery and reform," he told the Andrew Marr show on BBC One.

But he rejected calls from Labour to slow the pace of cuts in the face of weak growth figures, rising unemployment and pressure on living costs from rising inflation and wage freezes.

"That would be a huge mistake. We would lose economic stability. We would be back in the mess of wondering what is going to happen to the UK's credit rating. That is not going to happen."

Tax pledge

But he added: "Having undertaken the rescue mission, I do not have to come back and ask for more this year.

"I can say in the Budget this week I am not going to be asking for more tax rises or spending cuts."

The coalition government has said Wednesday's package of tax and spending measures will be the most pro-enterprise and business-friendly "in a generation" - expected to include steps to make it easier for firms to hire workers, to cut red tape and reform the planning system.

Mr Osborne said there would be extra money for apprenticeships and vocational skills programmes and he was also looking "very carefully" at steps to reduce the impact of high petrol prices.

Labour have said urgent action is needed to get people back to work in the face of rising unemployment and record youth jobless levels.

It wants a £2bn bank bonus tax levied by the last government in 2009 to be re-introduced in order to pay for 100,000 new jobs in the construction industry.

'Show humility'

Ed Balls said his opposite number should "show some humility" and admit the rise in unemployment, falling consumer confidence and weak growth proved that his strategy was not working.

"Getting the deficit down is not an economic strategy. Slamming on the brakes will not work," he told Andrew Marr.

"The question for George Osborne in the Budget is will he actually get jobs and growth into our economy. So far we have seen precious little."

The government has accused Labour - which wants to halve the deficit over four years as opposed to the coalition's aim to eliminate it entirely - of opposing every spending cut, but Mr Balls said ministers were themselves "in denial" about growth.

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Media captionEd Balls: I'm not a deficit denier

"We should get the deficit down but in a steady way - not in a reckless way... George Osborne's plan is bad economics, it will not work and it looks as if I was right and George was wrong."

But Labour's clarity on the deficit has been by questioned former cabinet minister Hazel Blears, who told the BBC the party should be "pretty explicit" about what areas it would cut if it were in power.

"I think the public expect us to at least give a broad direction of travel," she told the Politics Show.

"The public are pretty reasonable - they don't expect you to dot every I and cross every T about your policy - but I do think they are at the moment just a little worried that we have not been quite as clear as we ought to be."

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