July 25 (Bloomberg) -- U.K. Chancellor of the Exchequer George Osborne said his austerity policies are making headway against “deep-rooted” economic problems as his critics said he was making them worse.
Britain’s recession deepened in the second quarter, shrinking the most in three years with a contraction of 0.7 percent, official data showed today. The economy is now 0.9 percent smaller than in the third quarter of 2010, just after Prime Minister David Cameron’s coalition came to power.
“We all know the country has deep-rooted economic problems and these disappointing figures confirm that,” Osborne said in a statement released by his office in London today. “We’re dealing with our debts at home and the debt crisis abroad.”
Osborne had banked on the economy expanding by as much as 2.8 percent this year under his blueprint upon taking office in 2010. His opponents in the Labour Party say his fiscal plans are too harsh at a time when households and banks are weighed down by too much debt.
“We’ve made progress over the last two years in cutting the deficit by 25 percent and businesses have created over 800,000 new jobs,” Osborne said. “But given what’s happening in the world we need a relentless focus on the economy and recent announcements on infrastructure and lending show that’s exactly what we’re doing.”
Still, Labour says those policies aren’t enough on their own and said Osborne’s fiscal plans have squeezed spending and hurt confidence. Labour also says austerity is self defeating as weak growth makes it harder to tame the deficit.
“These shocking figures speak for themselves,” Labour’s Treasury spokesman Ed Balls said in a statement. As we warned two years ago, David Cameron and George Osborne’s ill-judged plan has turned Britain’s recovery into a flat-lining economy and now a deep and deepening recession,’’ Balls said.
Labour called for a “change of direction” and said Osborne should introduce a tax on bankers’ bonuses to fund jobs for young people and the construction industry, cut Value Added Tax charged on most goods and services and tax breaks for small companies.
Matthew Oakeshott, a lawmaker in the upper House of Lords with Cameron’s Liberal Democrat coalition partners, took a swipe at Osborne when he told Sky News that “we need our A team at the Treasury.”
Scottish National Party lawmaker Stewart Hosie called for an “urgent change” in policy. Welsh nationalist Plaid Cymru lawmaker Jonathan Edwards said today’s data were “disastrous.”
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