Chancellor George Osborne says if European leaders cannot find a solution to the European sovereign debt crisis, the Government’s new growth forecasts could be far too optimistic.
This week, the Office for Bud-get Responsibility said it expects growth in the UK to dip from 0.9 per cent this year to 0.7 per cent in 2012 before rising to 2.1 per cent in 2013, 2.7 per cent in 2014 and 3 per cent in both 2015 and 2016. This time last year, the OBR projected 2.3 per cent growth this year and 2.8 per cent in 2012.
Delivering his autumn statement on Tuesday, Osborne said the UK may struggle to avoid recession if no solution is found to the eurozone crisis.
He said: “The OBR is clear this central forecast assumes – in their words – ’the euro area finds a way through the current crisis and that policymakers eventually find a solution that delivers sovereign debt sustainability’. If they do not, then they warn that there could be ’a much worse outcome’ for Britain. I believe they are right. We hope this can be averted.”
Osborne added that the Gov- ernment is undertaking “ext-ensive contingency plann- ing” to deal with the fallout of any possible outcome of the euro crisis.
Responding to Osborne, shadow Chancellor Ed Balls said: “If eurozone countries continue to fail to sort out their prob- lems, it will have an impact here but Britain’s recovery was cho-ked off over a year ago before the euro crisis.”
The OBR this week predicted a slowdown in the reduction of public borrowing. It now expects it to fall from £127bn this year to £53bn in 2015 and £24bn in 2016.
The OBR’s March forecast expected Government borrowing to fall from £121bn this year to £29bn in 2015.