Politicians and economists have lined up to attack chancellor George Osborne after Office for National Statistics data showed the UK economy shrunk by 0.3 per cent in Q4 2012.
UK gross domestic product had grown 0.9 per cent in Q3 2012 after a boost from the Olympics but concerns are now growing that the country may plunge into a triple dip recession with negative growth in Q1 2013.
Shadow chancellor Ed Balls attacked Osborne and prime minister David Cameron of “dangerous complacency”.
He says: “Today is the moment when David Cameron and George Osborne’s complacency is completely exposed. These deeply disappointing figures expose just how dangerously complacent the prime minister was when he said last autumn that the ‘good news will keep coming’.
“Cameron and Osborne have been asleep at the wheel. They’ve spent the last six months obsessing about a referendum in five years’ time, not focusing on the problems in our economy today.”
National Institute of Economic and Social Research director Jonathan Portes also hit out at Osborne’s spending plans.
He says: “The main issue is not whether there is a double or triple dip recession but the trend of no growth over the last two years.
“It’s a combination of poor fiscal and financial policy from the Government and huge policy mistakes by EU Governments. Both have implemented bad policy and the interaction between the UK and EU is doing much of the damage.”
Osborne, who has spent the last two days at the World Economic Forum in Davos, told Sky News the figures were a reminder of the “difficult” economic situation caused by recession in the Eurozone and debt built up over many years.
He said: “Now we can either run away from those problems or we can confront them and I’m determined to confront them so we can go on creating jobs for the people of this country.”
Deputy prime minister Nick Clegg also admitted today that he regrets cutting capital expenditure so much. Labour seized on the remarks as the first admission of “serious mistakes”.
Yesterday International Monetary Fund chief economist Oliver Blanchard said the March Budget should be used to “take stock” of spending plans and end austerity.