Britain will see its slowest economic recovery for a generation as cash flows dry up, the Office for Budget Responsibility predicted this week as Chancellor George Osborne defended the coalition Government’s measures to erase the deficit by 2015.
The measures are predicted to give a good chance of meeting the target, but Labour warned that ministers risked creating a jobless recovery.
The OBR says that, although the economy will continue to grow over the next five years, growth will not reach three per cent in any of the four years after the 2008-09 recession, a situation unprecedented since the recession of 1974-75.
It says this is partly because of “the Government’s fiscal consolidation” and partly because of more cautious lending and the reduction of corporate debt.
The OBR also predicted that unemployment will rise from 7.6 per cent last year to eight per cent in 2011, before falling to 6.1 per cent in 2015. In 2007 unemployment stood at 5.4 per cent.
In his autumn statement to MPs, Mr Osborne said there would be one million more jobs by the end of the Parliament, and announced the OBR was expecting 160,000 fewer public sector job cuts than previously predicted, due to further cutting of the welfare bill.
Shadow Work and Pensions Secretary Douglas Alexander said: “For people in work now but worried they might lose a public sector job or a private sector job dependent on government contracts, it isn’t possible to adjust to a different economic geography or learn a whole new set of skills overnight.
“The risk of a too-static labour market wouldn’t just hurt people who are out of work – the continued threat of unemployment will leave millions less secure and less likely to spend money in the local economy.”
He added: We don’t just need to avoid a jobless recovery across the country, we need to prevent one in any community”.
A report by Durham University this week predicted that up to 49,000 jobs overall could be lost in the north-east of England in the next five years, including 20,000 in the private sector.
TUC general secretary Brendan Barber commented: “By 2015, the UK economy will still not be back to where it was before the recession hit in 2008. No politician should seize on these figures as some sort of good news story, least of all one that has just abandoned its plans to publish a jobs and growth strategy for the country.”
