The Chancellor George Osborne has told Parliament that the UK’s economic recovery is likely to be longer and harder than was initially thought.
In a statement to the House of Commons, which has been recalled for a special emergency session following widespread rioting, Mr Osborne made the admission amid renewed turmoil on global markets.
The Chancellor said that, although the coalition’s efforts to tackle the deficit had made the country a “safe haven” for investors, UK plc was not “immune” to the international “storm”.
As the FTSE dropped below the psychologically-important 5,000 mark again, he warned that the world faced its most dangerous moment since the credit crunch hit in 2008.
“History teaches us that recovery from this sort of debt-driven balance sheet recession was always going to be choppy and difficult. We warned that that would be the case,” Mr Osborne told the Commons.
“The whole world now realises that the huge overhang of debt means that the recovery will take longer and be harder than had been hoped. Markets are waking up to this fact and that is what makes this the most dangerous time for the global economy since 2008.
“I think we should be realistic about that. I think we should set our expectations accordingly.”
In a comment that hinted at problems faced by US President Barack Obama during recent negotiations over the US’ financial problems, Mr Osborne blamed a lack of economic progress on political rather than economic forces: “Everyone knows what needs to be done, but progress so far has been frustratingly slow, with lengthy disagreements on technical definitions let alone any concrete actions.
“The barriers are political not economic, so it is up to the world’s politicians to overcome them. There are no excuses left.”
In response, the Shadow Chancellor Ed Balls said Mr Osborne’s policies were nonetheless having a negative impact outside the money markets. He told the Chancellor: “Here in Britain families and businesses, deeply worried about their jobs and mortgages, will hear your talk of ‘safe havens’ and conclude you are either deeply complacent or in complete denial about what is going on in our country.”
He added: “We do need a tough, medium-term plan to get our deficit down … but it is your reckless policies, too far and too fast, that have ripped out the foundation of the house and left our economy deeply exposed to this brewing global hurricane.”