George Osborne last night insisted the Government was sticking to its economic course, telling business leaders “now is not the time to lose our nerve”.
Spending more to rejuvenate the UK’s fortunes is “patently ludicrous” and would set the recovery back, the Chancellor added.
Addressing the CBI annual dinner at Grosvenor House, he also rubbished Labour calls for a temporary VAT cut, claiming the figures do not “stack up”.
“My message to the business community and to the country is this: we have a clear economic plan,” he said.
“Our plan is working. Now is not the time to lose our nerve. Let’s not listen to those who would take us back to square one.
“Let’s carry on doing what is right for Britain, let’s see this through.”
But the Chancellor said the Government would not deviate from its “credible” approach, which has seen the deficit cut by a third.
He warned easing fiscal policy to fuel growth would be “mistaken” and suggested any sense the UK was going to “print its way out of trouble” would spark a “catastrophic” response in the markets that would hit families in their pockets.
The Chancellor’s speech came after Sir Mervyn King gave a glimmer of hope in his last economic forecast as governor of the Bank of England.
In the quarterly inflation report he said growth will be a “little stronger” than previously hoped, setting the UK on course for a “modest and sustained” recovery.
The economy should expand by 0.5% in the second quarter of this year, he said, while inflation will not surge as much as feared.