Britain to extend austerity to 2018 as faltering economy goes into reverse

Austerity measures are to be extended for a further year to 2018 in Britain, finance minister George Osborne announced yesterday, as Britain’s faltering economy went into reverse.

In a bleak autumn statement to the House of Commons, the chancellor announced a £3.7bn (€4.5bn) squeeze on welfare and a £1bn raid on the pensions of the wealthy, as he admitted that the nation’s deficit will not be eliminated until well into the next parliament.

He sought to sweeten the pill by scrapping a planned 3p-a-litre rise in fuel duty which had been due to come in January, cutting corporation taxby 1% and introducing changes to tax thresholds which will see earnings below £9,440 taken out of income tax altogether.

But he was forced to admit theindependent Office for Budget

Responsibility(OBR) now believes he will miss his target for debt to start falling as a proportion of GDP from 2015/16 — the year of the next general election. The OBR downgraded its forecasts for GDP growth in each of the next five years, predicting that the economy will shrink by 0.1% in 2012, rather than growing by 0.8% as they expected in March.

On his other key target, Mr Osborne was able to boast that the state deficit will fall in each of the next five years. Having inherited borrowing of £159bn in 2010, the coalition government has brought it down to £108bn this year, forecast to drop further to £99bn next year and £31bn by 2016.

But Labour said the chancellor was only able to declare good news on borrowing because his figures include an expected £3.5bn windfall from the auction of 4G telephone spectrum.