LONDON (Reuters) - Chancellor George Osborne said on Monday the UK economy had turned a corner and that its recovery was a vindication of his focus on fixing public finances.
He accused his political opponents of promising a “disastrous” change of course from the austerity he has imposed.
Osborne, his eye on elections due in May 2015, declared the government as the winner of the long-running argument over the pace of spending cuts. In a direct rebuttal to the Labour party, he said anyone who wanted to borrow more in order to spend now was “not fit for government”.
“The economic collapse was even worse than we thought. Repairing it will take even longer than we hoped. But we held our nerve when many told us to abandon our plan,” Osborne said in a speech to economists and the media.
“And as a result, thanks to the efforts and sacrifices of the British people, Britain is turning a corner,” he said at a London building site where construction had recently restarted.
Until now Osborne has been cautious about making political capital from the signs of life in Britain’s economy. But, calling on a growing body of economic evidence from recent months, he sounded his most upbeat note on the recovery yet.
“The evidence suggests tentative signs of a balanced, broad based and sustainable recovery, but we cannot take this for granted,” he said.
The Labour party dismissed Osborne’s comments as an attempt to “rewrite history” and said his policies had stifled growth for three years.
Both Labour and the Conservatives are looking to set the agenda for their election campaigns at party conferences this month. Osborne used Monday’s speech to counter opposition claims that he had done little to tackle a decline in living standards.
The minister promised action to cut energy and water bills, transport costs and to reduce the cost of financial services.
“These are a burden on families - and we are doing everything we can do to reduce their cost - with more to come this autumn,” he said
Labour has a modest lead over Cameron’s Conservatives in most polls. However, Labour leader Ed Miliband and his would-be chancellor Ed Balls trail Cameron and Osborne when voters are asked who they trust to handle the economy.
Labour, which held power from 1997 to 2010, saw its economic credibility undermined by the financial crisis.
Osborne also said a recent rise in government borrowing costs would have been even sharper if the Bank of England under its new governor, Mark Carney, had not given a long-term commitment to keeping interest rates low.
“Market movements since the August Inflation Report vindicate the need for forward guidance - the counterfactual would have been even bigger increases in yields in response to positive economic data,” he said.
Financial markets have brought forward their expectations of a first rise in Bank of England interest rates since the forward guidance policy was announced in early August, but the general public now expect rates to stay on hold for longer.
Carney’s championing of forward guidance policies when he previously headed Canada’s central bank was a major reason why Osborne head-hunted him to succeed Mervyn King as BoE governor.
Editing by William Schomberg/Jeremy Gaunt