Osborne says critics proved 'wrong'


George Osborne

Critics of Britain's economic recovery plan have been proved "comprehensively wrong", George Osborne has said.

The Chancellor conceded "many risks remain" for the UK, including the fall out from the crisis in Ukraine and the sluggish eurozone recovery, as he took to the world stage but hailed the success of the upturn a year after the International Monetary Fund (IMF) warned that his austerity policies were "playing with fire".

Mr Osborne was in Washington for the spring meetings of the IMF and World Bank, basking in the latest IMF forecasts which predict the UK will be the fastest-growing economy among the major developed nations this year.

In an upbeat address to the American Enterprise Institute he said: "Pessimistic predictions that fiscal consolidation was incompatible with economic recovery have been proved comprehensively wrong by events.

"Cutting deficits and controlling spending has not choked off recovery but has instead laid the foundations for sustainable growth.

"Many risks remain, but all this should be cause for cautious optimism."

He added: "The pessimists said our plan would not deliver economic growth. Now they say economic growth will not deliver higher living standards.

"They were wrong about the past and they are now wrong about the future. It's only by continuing to work through our long-term economic plan that we can deliver more economic security and a brighter future for all.

"If we can control our public finances, strengthen our financial systems and set free the power of human enterprise and innovation then there is no reason why our best days should not be ahead, for all of us."

He used the keynote speech to reject the arguments of the IMF's chief economist, Olivier Blanchard, who warned last year that the UK's austerity policies were strangling growth, saying such an approach was "precisely the wrong prescription for our economies".

The Chancellor said that the strengthening economy in Britain is underpinned by well-capitalised banks and a "credible" fiscal policy.

He argued that the UK's experience has shown that claims that recovery required more fiscal stimulus and higher government borrowing were wrong, and that re-building the public finances goes hand-in-hand with restoring the wider economy.

Mr Osborne pointed to figures showing that job creation is three times faster than in any previous UK recovery - with four new jobs in the private sector for every one lost in the public sector - while the rate of growth in investment spending is outstripping the United States.

"Our economy has grown faster than any other in the G7 over the last year and is now forecast by the IMF to do the same in 2014. This is despite warnings from some that our determined pursuit of our economic plan made that impossible.

"All of this demonstrates that fiscal consolidation and economic recovery go together, and undermines the pessimistic prognosis that only further fiscal stimulus can drive sustainable growth. Indeed, that is precisely the wrong prescription for our economies.

"Instead of more debt or more government spending, we need to get our public finances in order, make structural reforms and compete in the world again."

The Chancellor also singled out Cabinet colleague Michael Gove for praise for his controversial radical education reforms, insisting that they would help bolster Britain's economic recovery.

"There is one area of reform that I believe is more important for our long-term prosperity than all the rest - that can deliver growth rather than stagnation and simultaneously ensure that the gains from growth are shared, and that is education."

He added: "What unites all of these reforms is a belief that our nation will only make progress if we make use of every child's talents and liberate every student's potential. In all these ways we can ensure that the link between growth and prosperity remains unbroken."

Mr Osborne also called for a bolder approach to cutting edge science, including areas such as GM crops.

He said: "We should encourage the potential of new genetic technologies not fear them; in Europe we must make the case for GM crops instead of giving in to hostility and protectionism; and all of us need to invest in the application of new discoveries, such as graphene - discovered in the UK - instead of allowing our competitors to overtake us."