MPs say Osborne’s Budget made recession more likely

The Treasury Select Committee, a Parliamentary group with a Conservative majority, has concluded that Chancellor George Osborne's austerity Budget has made it more likely that Britain will suffer a double-dip recession.

In their first report, the MPs pointed out the concern among some economists that cutting public spending and raising taxes too quickly risked withdrawing a much-needed stimulus for the economy.

"There is concern that such a consolidation may come too early and cut too deeply, and as such cause the economic recovery to falter, leading to a 'double dip' recession."
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However, the committee added that it thought the Budget, which raised taxes and aimed to cut £100bn from government spending, would make the economy grow more strongly in the long term.

"It appears that there has been a slight increase in the chance of near-term negative growth and an increased likelihood of positive growth in the outer years," the MPs said.

The Office for Budget Responsibility, the government's new independent spending watchdog, reduced its forecast for economic growth from 1.3 per cent for 2010 and 2.6 per cent for 2011 before Osborne's Budget to 1.2 per cent and 2.3 per cent afterwards.

The committee believes there will be room for manoeuvre in the future should Britain suffer two successive quarters of negative growth. When he testified to the committee, Osborne said that he had aimed to balance the budget a year earlier than he thought was strictly necessary.

"We welcome this as a signal that if economic conditions demand it he may be prepared to take measures to stimulate the economy, even if these delay the current plans for cutting the deficit," the MPs said.

Read a full report at the Daily Telegraph. ·