Balls warns on UK's economic growth

Slow growth in the UK economy will undermine confidence and make it more difficult for the Government to get the deficit down, shadow chancellor Ed Balls warned today.

Speaking on the day when the Bank of England downgraded growth forecasts for the next two years, Mr Balls warned that Chancellor George Osborne’s economic policy was threatening to harm growth and jobs.

He said Britain was in danger of falling victim to the same “vicious circle” seen in Portugal, Ireland and Greece, where spending cuts and tax rises have led to unemployment, reduced growth and declining market confidence.

“What Ireland, Portugal and Greece have all discovered is that it does not matter how much they try to cut spending or raise taxes – if they cannot create jobs and growth, their debt and deficit problems and the loss of market confidence gets worse, not better,” said Mr Balls.

“And my concern is that we are seeing the same vicious circle here in Britain.

“If the economy isn’t growing and so fewer people are in work paying taxes - and more people claim benefits instead – it makes it harder to get the deficit down, and harder to maintain confidence.

“So when we see that output was stagnant over the last six months – no growth at all – and when this morning the Bank of England downgrades its forecast for economic growth this year into next, this isn’t just bad news for jobs and growth.

“I fear it will make it harder to get the deficit down – and undermine long-term investment and confidence at just the wrong time.”