Triple dip recession avoided despite slow growth
But political opponents pointed out that the UK is suffering its slowest recovery in a century after the Office of National Statistics (ONS) revealed that the UK economy grew by just 0.3 per cent in the first quarter of 2013 compared to the last three months of 2012.
The figure though provided some much needed good news for the beleaguered Chancellor after a miserable month where the International Monetary Fund (IMF) called for a lessening of UK austerity and the UK’s credit rating was reduced to AA+ by Fitch with public sector borrowing down just £300 million in the last 12 months.
Mr Osborne said: “These figures are an encouraging sign the economy is healing. Despite a tough economic backdrop, we are making progress. The deficit is down by a third, businesses have created over a million and a quarter new jobs, and interest rates are at record lows.”
He added: “We all know there are no easy answers to problems built up over many years, and I can’t promise the road ahead will always be smooth, but by continuing to confront our problems head on, Britain is recovering and we are building an economy fit for the future.”
But opponents said that the modest growth underlined a need for a change of strategy.
Labour shadow chancellor Ed Balls said: “If we’re to have a strong and sustained recovery, and catch up all the ground we have lost over the last few years, we need urgent action to kick-start our economy and strengthen it for the long-term - as Labour and the IMF have warned.”
He added: “We need radical bank reform and a jobs and growth plan, including building thousands of affordable homes and a compulsory jobs guarantee for the long term unemployed. And instead of a tax cut for millionaires, we need a lower 10p starting rate of tax to ease the squeeze on millions of people on middle and low incomes.”
Stimulus needed - Swinney
SNP Finance Secretary John Swinney also pressed for a stimulus package.
He said: “There is now a growing consensus calling on the Chancellor to change course on the UK’s failing economic policies.
“These figures show that underlying growth remains extremely fragile and that the UK economy has been bumping along the bottom for the last eighteen months. The UK Government is failing in its responsibilities.
“The economy continues to be well below pre-recession levels – with these figures confirming that the UK has the worst economic performance of any G7 country except Italy.
“The IMF this month downgraded its forecast for growth in the UK economy during 2013 by 0.3 percentage point to just 0.7 per cent and further downgraded their predictions for 2014, the most significant downgrade for any advanced economy.”
He also argued that the latest data puts Scotland in a stronger position than the rest of the UK.
He said: “Scottish data last week showed positive trends in the labour market and in economic growth, with Scotland growing in the final quarter of 2012, whilst the UK as a whole contracted, and with Scotland outperforming every country in the UK in terms of its unemployment rate.
“We are committed to building sustainable economic growth for Scotland and we are adopting a specifically Scottish approach to this. We can’t allow the UK Government’s economic policies to derail these positive developments.
“It is time for the Chancellor to change his fiscal consolidation plan.”
Economists said that the UK economy has a long way to go before it recovers.
Phil Orford, the chief executive at the Forum of Private Business said: “While the service sector looks to have led the way, the construction industry figure is more worrying, and shows the need to get projects moving at a quicker pace.”
Vicky Redwood, UK economist at Capital Economics said the recovery still faced “significant obstacles ahead, with households still experiencing falling real pay and policymakers still struggling to get bank lending to rise”.
“These figure offers some hope that things might finally be starting to move in the right direction again,” she added.