IMF chief backs austerity measures
Government austerity measures have been backed by the International Monetary Fund but Labour seized on the latest United States growth figures as proof Britain must change course.
In a boost to Chancellor George Osborne, IMF head Christine Lagarde said maintaining the deficit reduction programme remained the "the right thing to do", despite the threat of recession and economic forecasts being revised downwards.
Figures released on Wednesday showed the economy shrank by 0.2% in the final quarter of last year - slightly more than anticipated and fuelling Labour calls for a change of course. The IMF has dropped its forecasts for UK growth to just 0.6% for this year, down from 1.6%, and 2% in 2013, down from 2.4%.
Ms Lagarde told BBC Radio 4: "Our sense is that under the present circumstances the policy that is in place is the right one, and we have said that very explicitly."
But shadow Chancellor Ed Balls claimed that growth in the US, which has implemented rounds of fiscal stimulus, proves Britain must change course in the upcoming budget.
The US Commerce Department said the world's largest economy grew at an annualised 2.8% in the final three months of last year.
Mr Balls said: "The US government has taken a more balanced and steady approach to deficit reduction up to now and they have more than recovered all the output lost in the global recession, while in Britain we are still almost 4% below our pre-crisis peak.
"And since George Osborne's spending review in the autumn of 2010 our economy has grown by just 0.3% while the US has grown by 2.2% over the same period. While the US growth figures compare favourably to Britain, policymakers in America are rightly concerned and debating what more they can do to boost jobs and growth.
"Yet here in Britain the Conservative-led Government has sent our economy into reverse and is set to borrow £158 billion more than planned, but complacently insist they are going to plough on regardless. David Cameron and George Osborne have eight weeks until the Budget to learn that lesson and change course."
Michael Fallon, deputy Conservative Party chairman, said: "The Government's credible plan to live within its means and pay its way in the world has won the confidence of the markets, ensuring interest rates stay low for families and business. That's why the head of the IMF has once again endorsed this plan."