Mixed reaction to forecasts

Union leaders and some economists meanwhile criticised the OBR's findings.

Len McCluskey, general secretary elect of Unite, said: "We seem to be living in two parallel economic universes – the optimistic one being peddled by the coalition's creation, the OBR.

"And then there is the 'real' one which sees firms being unable to borrow money from the state-owned and other banks to invest in jobs and expanding their businesses, where 81bn of public spending cuts will hit demand in communities, where the public sector is a major economic generator and where reputable economists are predicting more than one million jobs being lost in the public and private sec- tors.

"Something does not add up here and this latest forecast from the OBR poses as many questions as it attempts to answer."

Vicky Redwood, of London-based consultancy Capital Economics, said: "The OBR's update does nothing to alter the fact that the fiscal squeeze will be the defining influence on the economy over the next few years. And there has been little in the recent economic news to make us more optimistic about the ability of the private sector to compensate."

Other economists, including David Kern at the British Chamber of Commerce and Graeme Leach of the Institute of Directors, have labelled the OBR forecasts "optimistic".

Responding to the criticism, OBR chairman Robert Chote said: "This is our central view. There are other forecasts out there that are more and less optimistic."