Weaker than expected UK growth and turbulence in global markets could lead to bigger cuts in public spending in next month’s budget, the Chancellor warned today.
The latest GDP figures published this week confirmed the British economy grew by 1.9% in 2015, significantly lower than had been forecasted in November, when the independent Office for Budgetary Responsibility predicted growth of 2.5% for the year.
Confidence in the global economy has been shaken by turbulent commodities markets, alongside worries that China’s economy – the second largest in the world – is slowing.
Speaking to the BBC at a meeting of G20 finance ministers in Shanghai, Chancellor George Osborne said: "We've just had new figures that show the economy is smaller than we thought in Britain, and we also know that global risks are growing and Britain is not immune to those things.
“We may need to undertake further reductions in spending because this country can only afford what it can afford and we will address that in the Budget. I'm absolutely clear we've got to root our county in the principle that we must live within our means and have economic security.
"We'll set it out if we need to, how we'll reduce spending, but the first place I look to is further efficiencies in government. There are always ways to make government better, always ways to make sure that the taxes of people are better spent.
"The basic question is 'are we prepared to live within our means as a country?'. The last time we didn't we were right in the front rank of nations facing economic crisis, now although the problems are growing in the world actually of course Britain is growing more strongly than most countries."