The Chancellor gave his full backing to the OBR’s decision to revise down potential UK productivity growth.
The move follows comments from the Secretary General of the OECD last month that “productivity growth… has been decelerating in a vast majority of countries”.
“The OBR had thought that what they describe as the ‘drag from the financial crisis’ on our productivity would have eased by now, but the latest data shows it has not,” explained Osborne as he announced his Budget.
“We saw under the last government what happened when a Chancellor of the Exchequer revised up the trend growth rate, spent money the country didn’t have, and left it to the next generation to pick up the bill. I’m not going to let that happen on my watch,” he said.
“These days, thanks to the fact we have established independent forecasts, our country is confronted with the truth as economic challenges emerge, and can act on them before it’s too late. We fix our plans to fit the figures; we don’t fix the figures to fit the plans.
“The IMF have warned us this month that the global economy is at a delicate juncture and faces a growing risk of economic derailment.
“Eight years ago, Britain was the worst prepared of any of the major economies for the crisis we then faced. Today, Britain is among the best prepared for whatever challenges may lie ahead. That is what our long term economic plan has been all about.”
The OBR has forecast a growth in GDP of 2% this year, followed by 2.2% in 2017, and 2.1% in each of the three years after that. But Osborne warned that forecasts are predicated on Britain remaining in the European Union.
“The OBR correctly stay out of the political debate and do not assess the long-term costs and benefits of EU membership,” he said. “But they do say this, and I quote them directly: a vote to leave in the forthcoming referendum could usher in an extended period of uncertainty regarding the precise terms of the UK’s future relationship with the EU. This could have negative implications for activity via business and consumer confidence and might result in greater volatility in financial and other asset markets.
“Citing a number of external reports, the OBR say this: There appears to be a greater consensus that a vote to leave would result in a period of potentially disruptive uncertainty while the precise details of the UK’s new relationship with the EU were negotiated.
“Mr Deputy Speaker, the House knows my view. Britain will be stronger, safer and better off inside a reformed European Union.
“I believe we should not put at risk all the hard work that the British people have done to make our country strong again.”