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Chancellor warned of potential double-dip

By James Tapsfield

Published 21/07/2010

The government's drastic efforts to tackle the deficit could risk driving the UK back into recession, an influential group of MPs warned.

The Treasury Select Committee insisted Chancellor George Osborne must be ready to delay reducing the debt, and "stimulate" the economy through public spending if the recovery were to stall.

The cross-party body was delivering its initial verdict on the coalition's emergency Budget last month, which set out plans for reining in the Government's finances.

It highlighted suggestions from some economic commentators that the curbs had "raised the near-term risk of a period of negative growth".

"There is concern that such a consolidation may come too early, and cut too deeply, and as such cause the economic recovery to falter, leading to a 'double dip' recession," the MPs' report said yesterday.

"Whether or not this is the case, the global economic situation is fluid and fragile, and it is possible that the Chancellor may need to alter his current plans to compensate for external events."

The committee noted that the Chancellor had staggered the cuts and tax rises over a period of several years, and had also kept some flexibility in the case that economic growth forecasts proved too optimistic.

"We hope that this will be sufficient," the MPs said.

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