Osborne seeks path to growth as UK ‘on brink of fresh recession’

The Organisation for Economic Co-operation and Development (OECD) slashed its growth forecasts for the UK for next year to only 0.5 per cent and predicted the economy will shrink in the final quarter of this year and the first quarter of 2012

Unemployment is now expected to hit 9.1 per cent by 2013, putting another 400,000 people out of work on top of the current 2.6 million jobless, said the Paris-based think tank which warned that the eurozone debt crisis was the “key risk” to the world economy and called for “decisive action” to shore up the currency bloc.

Bank of England Governor Mervyn King also warned the economic outlook for the UK was “considerably weaker” than it was three months ago while the Office for Budget Responsibility (OBR) will significantly downgrade its forecasts for the economy today.

Labour leader Ed Miliband seized on the latest reports to renew his calls for the Government to change course and adopt measures like to temporary VAT cut.

“We welcome anything that will make a difference to the economy, but the problem is the Government doesn’t really seem committed to changing course,” he said. “In the circumstances the right thing to do is accept that there is a real need to change the way they are doing things.”

But Mr Osborne will vow once more to stick to spending cuts, and will claim that the Government has saved more than £20bn through low interest rates because of action it has taken since coming to power as he makes his Autumn Statement today and publishes the latest phase of the Government’s growth review.

He said there was no “quick fix” to Britain’s debt problems and dismissed the idea that the country could “borrow a bit more to get us out of debt”.

“What [the public] want the Government to do is stick to the plan that will take us safely through the storm and invest for the long-term future,” he said.

“They have had enough of politicians who think there is a quick fix solution who say you can borrow a bit more to get us out of debt.”

A £30bn infrastructure programme will include £5bn of public funding for the period to 2014-15 from further spending cuts or underspends – sparking a row over the Government’s green credentials after Chief Treasury Secretary Danny Alexander suggested up to £1bn could be raided from money set aside for carbon capture and storage trials.

Mr Osborne will also announce details of his credit easing scheme to free £40bn of lending for small businesses, a £1bn deal to find jobs for young people and he is set to delay a 3p-a-litre fuel duty rise and limit rail fares.

An extra 130,000 two-year-olds will be entitled to free childcare, costing £380m a year by 2014-15, while a small business package will include incentives to invest and relaxation of red tape, such as delaying moves to force them to enrol staff in a pension scheme.

But Ministers have to explain how they will fund many of the measures, with tax credits potentially being squeezed.

Responding to the infrastructure plans, Shadow Chief Secretary to the Treasury Rachel Reeves, MP for Leeds West, said: “Only genuinely additional or brought-forward investment in projects that are ‘shovel ready’ would both make an immediate difference to our flat-lining economy now and help strengthen the economy for the future. We will need to look closely at the detail of this announcement, how it is funded and how it is accounted for.”