George Osborne says vindicated by growth rebound, vows to stay on course
BRITISH Chancellor George Osborne celebrated a sharp turnaround in the economy as vindication of his push to fix a gaping budget deficit today but he said he would not relax his austerity grip in the years ahead.
Britain's economy is set to grow much more strongly in 2013 and 2014 than forecast as recently as March, Osborne said - a big relief for Prime Minister David Cameron facing a general election in 17 months' time - and a key measure of the budget deficit is on course to be in balance in the 2018/19 fiscal year.
"We have held our nerve while those - who predicted there would be no growth until we turned the spending taps back on - have been proved comprehensively wrong," he told parliament as he gave a half-yearly update on the government's economic plans.
Earlier this year, Osborne was under heavy criticism from the Labour opposition party as the economy flat-lined. The International Monetary Fund also urged him to speed up spending.
But a sudden pickup in growth in recent months means the coalition government's goal of fixing the public finances is no longer out of reach.
Osborne said British growth was faster than other major advanced economies, including the United States, and announced the first big fall in projected public borrowing since the coalition took power in 2010.
Borrowing - stripping out the effect of cash transfers from Royal Mail and the Bank of England - was revised down to 6.8pc of gross domestic product in the current fiscal year, from March's estimate of 7.5pc.
The deficit, by that measure, would be wiped out by the 2018/19 fiscal year.
Osborne said forecasts from Britain's budget watchdog, the Office for Budget Responsibility (OBR), also showed economic growth in the current fiscal year was expected to be 1.4pc, rising to 2.4pc in 2014/15.
That represented a big upgrade from the OBR's predictions in March of growth of 0.6pc and 1.8pc respectively.
However, gross domestic product remains smaller than before the financial crisis and Osborne stressed that Britain faced more spending cuts in the years ahead to rebalance its public finances and restore the economy to health.
"Britain's economic plan is working. But the job is not done," Osborne said, noting the structural budget deficit - which is not helped by a pickup in the economy - was not expected to fall any faster than previously forecast.