(London Post) Chancellor George Osborne warned that he might cut public spending more deeply than he previously planned after the country’s economic growth fell short of the pace foreseen in his plans to wipe out the country’s budget deficit.
Osborne, due to make an annual budget statement on March 16, said official growth figures announced on Thursday showed Britain’s economy was smaller than he had hoped for.
He also said in an interview with BBC television, which was broadcast on Friday, that “storm clouds” had gathered over the global economy and could hurt Britain further.
Osborne’s comments stood at odds with an appeal by the International Monetary Fund to finance ministers attending a Group of 20 nations meeting in Shanghai this week. The IMF urged countries to boost global demand through fiscal means.
Osborne, who is considered a front-runner to replace Prime Minister David Cameron as the leader of Britain’s Conservative Party, has staked his reputation on turning the country’s still large budget deficit into a surplus by the end of the decade.
“(We) may need to undertake further reductions in spending because this country can only afford what it can afford and we will address that in the budget,” Osborne told the BBC during a visit to Shanghai for the G20 meeting.
“I think everyone accepts that things have got more difficult since the start of the year as more information comes in, we make sure that… Britain lives within its means.”
Finance spokesman for Britain’s main opposition Labour party John McDonnell said Osborne’s comments represented “total humiliation”.
“Far from paying our way, Osborne’s short-term economics means Britain is deeper and deeper in hock to the rest of the world,” he said.
Britain’s economy expanded by 1.9 percent in 2015, according to official data, weaker than growth of 2.4 percent which was pencilled into the forecasts of the Office for Budget Responsibility which underpin Osborne’s budget plans.
The latest figures for nominal gross domestic product – a key metric for government debt when expressed as a percentage of economic output – also fell short of the OBR’s forecast and left Osborne with more work to do as he works towards his goal of a budget surplus by the end of the decade.
“We’ll set it out, if we need to, how we’ll reduce spending, but the first place I look to is further efficiencies in government,” Osborne said.
Britain has withstood the recent ructions in the global economy so far. But a sharp fall in consumer confidence this month could be a bad omen given the country’s reliance on household spending to drive growth.
Some economists argue that Osborne should use record low levels of government borrowing costs to fund investment and stimulate the economy as the global outlook darkens, rather than cut public spending further.