Osborne vows no turning back on cuts policy that is ‘rock of stability’

Chancellor George Osborne has used his first major speech after a summer of world economic turmoil to insist there will be no changes to economic policy, despite fears of a double-dip recession.

On a day when markets across the world, with the exception of the FTSE 100, fell again with more concerns over the eurozone debt, Mr Osborne told an audience in the City yesterday that his economic policy of slashing public spending was “the rock of stability” from which the government would not move and had made Britain a safe haven in a world of debt. It came in a week where the worst figures in a decade for the service sector, which represents 75 per cent of the economy, sparked fears that Britain was heading for negative growth and double-dip recession.

And it followed claims by former chancellor Alistair Darling, whose book is due to be released today, that Britain under Mr Osborne’s economic stewardship is in danger of “bouncing along the bottom”.

A defiant Mr Osborne said: “All the evidence from economic history suggests that, thanks to this overhang of debt, recoveries from financial crises are slower and choppier than recoveries from other kinds of recession.

“So, while we have all had to revise down our short-term expectations in recent weeks, the only people who should be fundamentally re-examining their view of the world are those who thought this time was different.”

And he made it clear that he and the government had anticipated the problems. He said: “This government has never thought that this time would be different. We understood right from the beginning that the world of the boom years had changed beyond recognition.

“We identified the problems and the risks – an overleveraged economy, an unsustainable budget deficit and a broken model of growth. We warned repeatedly that the recovery would be choppy.”

He made it clear that the government would not budge, despite calls from Labour and the SNP Scottish Government for a plan B to encourage growth. The plan we have set out is designed in tough times for tough times,” he said. “It is the rock of stability upon which any sustainable recovery depends, and we will hold to it.”

But he added: “We are not immune from what happens on our doorstep. But we can remain masters of our own destiny.”

The speech came after the Chancellor had clashed with Ed Balls for the first time since the shadow chancellor was criticised in Mr Darling’s memoirs.

Mr Osborne made frequent references to his predecessor as Mr Balls called on the government to impose a special tax on bankers’ bonuses.

Mr Balls repeated his call for a bonus tax to create jobs for young people on top of the government’s bank levy.

But Mr Osborne said: “I’m going to use the advice of the last chancellor – someone we know he [Mr Balls] is very close to.

“The last chancellor said of the bonus tax, ‘I think it will have to be a one-off, because frankly the very people you’re after are very good at getting out of these things and will find all sorts of imaginative ways of avoiding it’.”