Chancellor of the Exchequer George Osborne said improvements in U.K. economic growth won’t diminish his commitment to cutting the budget deficit, as he revealed he will announce new fiscal forecasts on Dec. 4.
“I still sit round that table at the G-20 with one of the highest budget deficits,” Osborne told reporters in Washington yesterday. “Britain continues to have some very serious public finance challenges that need to be addressed, and although we’ve brought the deficit down by a third it’s still too high. Where we’ve got resources available we’ve got to make sure we’re doing what we can to reduce the deficit.”
While Britain’s economic recovery is now gathering pace, weaker-than-forecast tax receipts forced Osborne to abandon his original goal of finishing his deficit-cutting program by 2015. The chancellor pledged last month to run a budget surplus by 2020 if his Conservative Party is re-elected in 2015, implying that he will carry on squeezing welfare and government spending beyond the current 2018 forecasting horizon to meet the new fiscal target.
“We have a clear economic plan, we’ve stuck to that plan,” said Osborne, who is in Washington attending the International Monetary Fund’s annual meeting. “I’m very far from feeling the job is done. We’re still in the very early stages of the recovery.”
Osborne said he will announce revised budget forecasts and details of new measures in his Autumn Statement in early December. In March, his fiscal watchdog, the Office for Budget Responsibility, predicted the economy would grow 0.6 percent this year.
Since then, growth has been faster than predicted, and economists now see expansion of 1.4 percent in 2013 and 2.2 percent next year, according to the median estimate in a Bloomberg survey.
Osborne also defended his Help to Buy program that allows people with minimal deposits to buy a home costing as much as 600,000 pounds ($956,000.) The second phase -- government guarantees for banks willing to finance 95 percent of the purchase price -- was introduced this week, three months earlier than planned, fueling criticism from lawmakers and economists that a housing bubble is brewing.
“It’s addressing a very specific problem which is a consequence of the financial crisis, which is the lack of availability of high loan-to-value mortgages which were a common feature of the U.K. housing market for many decades,” Osborne said. “We are fixing what has gone wrong in our financial system. It’s the right policy instrument to deal with a specific problem in our housing market.”
Asked whether the Bank of England should have direct powers over loan-to-value ratios rather than powers of recommendation, Osborne said its Financial Policy Committee could request the tool as part of its annual review of the housing market each September.
“I don’t’ want to preempt a request that hasn’t even come,” Osborne said. “I said to the FPC you tell us the tools you want and they did not ask us for that.”