Growth revised down - but no recession says Osborne

Chancellor George Osborne said that the Office for Budget Responsibility (OBR) has revised its growth for 2011 down to 0.9 per cent.

The OBR predicts 0.7 per cent growth next year but no recession.

In 2013 growth is forecast at 2.1 per cent followed by 2.7 per cent in 2014.

The figure is estimated at three per cent in 2015 and 2016.

Although the figures suggest recession will be averted the OBR warned that the Eurozone crisis could still drag the UK into one.

Meanwhile he said an unemployment rate of 8.7 per cent had been forecast for 2012.

Delivering his Autumn speech on the economy he said that he would show that the "country can live within it means and that the UK could get through its budget storm".

He said keeping interest rates low and making credit available to small businesses was vital. He confirmed a £40bn credit easing scheme to free up money for firms.

Osborne estimates it will cut the average interest rate faced by those firms by one per cent.

From April 2012, anyone investing up to £100,000 in a new start-up business will be eligible for income tax relief of 50 per cent, said Osborne.

In 2012, any tax on capital gains invested in such businesses will also be waived.

Outlining austerity measures he said the public sector pay freeze is to be extended by two years to one per cent year each year.

The rise in the state pension age from 66 to 67 will be brought forward to 2026, he said.

On the city he said: "I is this country's policy to keep London as pre-eminent financial centre... financial services will always be an important part of the UK."

He said that the bank levy will be raised for a third time this year, while the government's response to the Vickers report on banking will be published next month.

On stimulating growth and employment he said that 500 infrastructure projects had been earmarked across the UK. They will be mostly funded by £20bn from British pension funds.

In a throwback back to the right-to-buy policy of the 1980s families in social housing will be able to buy their homes at discounts of up to 50 per cent.

He said: "All this takes us in the right direction. People know the promises of quick fixes are like those of a quack doctor selling a miracle cure.

"We offer leadership for tough times."

Shadow chancellor Ed Balls claimed the OBR figures laid bare the government's borrowing and growth problems.

"His (Osborne's) economic and fiscal strategy is in tatters. He has been forced into higher borrowing. Cutting too far and fast has backfired."