Miliband Calls for a Change of Direction for Economic Policy; DEMAND FROM LABOUR LEADER AFTER THINK-TANK WARNING

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BRITAIN'S economic turmoil was laid bare yesterday with the latest slashed growth forecast fuelling fears that the recovery is even further off than imagined.

Chancellor George Osborne last night insisted the economy was "healing" but one of the world's most respected think tanks warned it had gone into reverse and Labour leader Ed Miliband demanded a major change of direction.

The Organisation for Economic Co-operation and Development (OECD) cut its forecast for the UK's economy and predicted a 0.7% fall this year, having previously expected a rise of 0.5%.

The UK is predicted to be the worst performing G7 nation apart from Italy.

The prediction that the UK will fail to pull out of its double-dip recession in the current quarter, which will see a 0.7% decline, came as Mr Miliband went to the London Stock Exchange to set out his vision for a reformed economy.

With polls suggesting Labour would win a 96-seat majority if an election was held tomorrow, Mr Miliband took the opportunity to showcase the goals he would seek as prime minister. He called for Britain to shift to a more highly skilled economy in a bid to ease the burden on middle-earners.

And he signalled a break with a key policy of the Brown years, saying that his Government would not be able to simply increase tax credits for the less well-off.

He said: "The redistribution of the last Labour Government relied on revenue which the next Labour Government will not enjoy. The option of simply increasing tax credits in the way we did before will not be open to us."

Instead, he promised "predistribution" - ensuring people are better paid rather than relying on tax credit top-ups.

The scale of the weakness which has hit the UK economy was laid bare in the OECD report.

Its 2012 forecast is significantly worse than the 0.5% expansion it predicted last year, when it slashed its forecast from growth of 1.8%.

However, the Chancellor insisted the economy was recovering and the Government was on the right track and remained committed to its core principles.

He said: "Our economy is healing - jobs are being created, manufacturing and exports have grown as a share of our economy, our trade with the emerging world is soaring, inflation is down, much of the necessary deleveraging in our banking system has been achieved, and the world is once again investing in Britain. …