UK's Osborne promises budget of 'hard truths' to balance economy
British finance minister George Osborne will promise on Thursday to deal with "hard truths" about Britain's unbalanced economic recovery in his annual budget next month, emphasizing a need for more manufacturing exports.
Speaking in Hong Kong en route to a G20 finance ministers' meeting in Australia, Osborne's speech is likely to be one of his last before he delivers his budget statement on March 19. The budget will be his final chance to meaningfully alter fiscal policy before a May 2015 election.
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Despite Britain enjoying its highest growth rate in six years, Osborne stressed a need to keep pursuing an austerity agenda in order to reduce the country's budget deficit and bring the national debt down to levels he views as sustainable.
"This is not a budget where we can rest on our laurels and say 'job done'," Osborne will say, according to speech extracts released by his office. "It is a budget where we must confront our problems and deal with some hard truths."
Osborne has to date been cautious not to be seen cashing in on the political capital generated by a surprisingly strong economic rebound for fear of stoking expectations that the government can afford to ease up on spending cuts.
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Any expectations of a let-up in austerity could benefit the opposition centre-left Labour party, leading in opinion polls, which has set itself looser targets for fiscal consolidation.
Osborne will say that chief among Britain's problems is that the recovery from a prolonged period of recession and stagnation is not yet secured, and that the economy has too much emphasis on consumer spending.
"We cannot rely on consumers alone for our economic growth, as we did in previous decades," he will say. "And we cannot put all our chips on the success of the City of London, as my predecessors did. Britain is not investing enough. Britain is not exporting enough."
His words echoed those of Bank of England governor Mark Carney who last week said that as yet the recovery was neither balanced nor sustainable. Carney also said that weak overseas demand was likely to make boosting exports a tough challenge.
Osborne did not give further details of any measures to encourage exports that would appear in his budget.
The focus on a resurgence of British manufacturing is a familiar refrain for Osborne. He made similar calls in his 2011 budget which he said would help make Britain the most attractive destination in Europe for business and investment.
However, a combination of the crisis in the euro zone and the government's austerity push have left Britain still largely reliant on consumer spending. A sharp fall in sterling over the past few years has proved of little help to exporters.
Major multinational firms have also cited the risk that Britain could leave the European Union, under Prime Minister David Cameron's plans for a referendum in 2017, as causing uncertainty that deterred inward investment.
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