GEORGE Osborne has resisted pressure to change course over his austerity plans as he warned there were “no easy answers” to the UK’s economic woes.
The Chancellor insisted that failing to tackle the country’s debt and deficit problems could leave the UK on the brink of a crisis like that in Cyprus.
But his Labour counterpart Ed Balls called on the Government to borrow more to stimulate growth and help get the deficit down.
The Shadow Chancellor accused Mr Osborne and Prime Minister David Cameron of failing to change course because they wanted to avoid “political humiliation”.
Mr Osborne said Wednesday’s Budget would contain measures to “help those who aspire to work hard and get on” but would also set out the scale of further curbs on public spending from 2015.
He indicated there would be help with the cost of childcare and also announced plans to accelerate the introduction of a cap on the amount people will have to pay for social care, bringing it in at £72,000 in 2016.
The £144-a-week single state pension will also be introduced a year ahead of schedule in 2016, Mr Osborne said.
But on his central aim of restoring the nation’s finances, the Chancellor said there was “no miracle cure” and “painstaking work” was required.
Mr Osborne said the crisis in the Cypriot banking system illustrated the dangers for the UK.
“That is an example in Cyprus of what happens if you don’t show the world that you can pay your way.
“I mean that is why in Britain we’ve got to retain the confidence of world markets,” he said.
In a bleak assessment of the challenge facing the country, Mr Osborne said: “There is no easy answer to Britain’s problems, there is no miracle cure because if there was a miracle cure it would have been deployed.
“It’s just a lot of hard work of dealing with Britain’s debts, helping businesses create jobs, helping families who want to work hard and get on.”
Mr Osborne is under pressure to help people with the cost of living, through cancelling a fuel duty rise due in the autumn and scrapping the beer duty escalator that automatically ups the price of a pint.
He indicated that there would be assistance to help with the “difficult balancing act” that parents face between the need to work and looking after children.
“I’m absolutely on the side of working mothers who have an incredible difficult balancing act, but who want decent, affordable childcare and want to make it worthwhile for them when they work – in other words help them with the costs of childcare and help them with the tax bill they pay when they go out to work,” he said.
Mr Osborne is tipped to announce extra investment in housebuilding and road projects – called for by leading business groups – and help for people to buy homes.
But he rejected a suggestion from Liberal Democrat Business Secretary Vince Cable that borrowing more to fund capital spending could boost the economy.
Mr Osborne said: “I agree that we need to spend more on capital, which is why I had taken the decision in December to increase the spending on capital – but paid for.
“In the end this country has got to pay its way, we can’t just keep on thinking the answer to our problem is more borrowing.”
Former Cabinet minister Liam Fox, a standard bearer for the Tory party’s right, has called for corporation tax to be reduced to zero and far bigger cuts to public spending, notably welfare.
The Institute of Economic Affairs called for public spending to be slashed to help fund tax cuts for households and businesses.
But Mr Balls called for the Government to borrow more to fund a stimulus package in a bid to boost growth.
He indicated that he would support the Chancellor if he decided to raise the basic rate of income tax to help relieve the squeeze on households.
Mr Balls said: “Vince Cable, the International Monetary Fund, myself, many others, are all saying unless you get the economy moving, unless you get some growth back, the deficit will stay high.
“Whereas if you act now with some stimulus to kick-start the economy, that’s the way to get growth moving,” he said.
He accused Mr Osborne and Mr Cameron of refusing to consider a change in approach because of the political fallout that it would bring.
“The only reason why they won’t now change course is to avoid their own political humiliation,” he said.