OECD warns Osborne on UK austerity

GEORGE Osborne should spread austerity over a longer period than currently planned to avoid damaging the economy, a leading global watchdog has claimed.

The Chancellor looks set to use next month’s Budget – the first since the Tories’ dramatic election victory last month – to outline plans to balance the books by 2018-19.

But the Organisation for Economic Co- operation and Development suggested that the cuts required in 2016 and 2017 to return Britain to the black may be too harsh. It urged the government to even out austerity over a longer period to ‘lower its impact on growth’.

Despite the warning, the Parisbased think-tank said it again expects Britain to be the fastest growing major economy in the world this year. It forecast growth of 2.4pc – less than the 2.7pc it previously expected but still stronger than the rest of the G7, which includes the US, Japan, Canada, Germany, France and Italy.

The watchdog slashed its growth forecast for the US from 3.1pc to 2pc and warned that the global economy is ‘muddling through’.

OECD secretary-general Angel Gurria said: ‘The process of healing from the biggest crisis in our lifetime has been very slow. And we are still suffering from its lega- cies.’ Gurria has been a strong supporter of Osborne’s plans to eliminate the deficit but its twiceyearly economic outlook, published yesterday, will raise eyebrows ahead of the Budget on July 8.

The OECD warned that public spending is scheduled to fall significantly in 2016-17 and 2017-18 before stabilising the following year and rebounding in 2019-20.

It added: ‘Evening out the profile of fiscal consolidation would lower its impact on growth.’

A Treasury spokesman said: ‘The OECD forecasts shows our plan is working, with Britain keeping our place as the fastest-growing major economy in both 2014 and 2015.’