George Osborne says recovery will be 'choppy'

Chancellor George Osborne has said Britain's economic recovery is likely to be "choppy" - but said the coalition was determined to stick to its course.

He rejected Labour accusations that he was taking a "gamble" by embarking on one of the biggest programmes of spending cuts ever attempted in the UK.

The gamble would have been not to act, he said in a speech to the City.

Labour says the chancellor's plans will damage growth, cost jobs and create greater unfairness in society.

Mr Osborne's speech comes ahead of the autumn's comprehensive spending review, in which he will outline plans for most Whitehall departments to make cuts of around 25%, in an effort to reduce the £155bn budget deficit.

It also follows criticism that the government is at risk of being defined entirely by its cuts programme and failing to deliver a positive message about the future.

Figures released on Tuesday reveal the UK inflation rated eased to 3.1% in July from 3.2% the previous month - still well above the Bank of England's 2% target.

Speaking at the London offices of the Bloomberg news agency, Mr Osborne said the UK could be "cautiously optimistic" about the economic outlook.

But he agreed with the view of the governor of the Bank of England, Mervyn King, that the recovery would be "choppy".

'Empowering people'

Mr Osborne added: "There are some political opponents who claim that in setting out our decisive plans to deal with the deficit we have a taken a gamble with Britain's economy.

"In fact the reverse is true. The gamble would have been not to act, to put Britain's reputation at risk, and to leave the stability of the economy to the vagaries of the bond market, assuming investors around the world would continue to tolerate the largest budget deficit in the G20."

The chancellor hinted at what public services could look like after the spending review, saying: "We are shaping the economy of the future by promoting a pro-growth agenda. We are shaping the big society of the future by decentralising power and empowering people."

The government intended to "follow a ruthless approach to waste, inefficiency and bureaucracy in government", which could mean "bringing in external expertise" if necessary.

He added: "We will tackle soaring welfare bills. And we will refocus public spending in those areas that will make a difference to our long-term economic success.

"It is not about how much the government spends but about what the government actually does with the money."

In his speech, Mr Osborne launched a strong attack on the previous Labour government and its claim to have ended boom and bust, calling it "the greatest failure of economic policy-making for more than 30 years".

He also claimed it had not specified where its planned £44bn cuts to tackle the deficit would come from.

But shadow chancellor Alistair Darling denied this, saying Mr Osborne was "running the risk of derailing the recovery" by taking too much money out of the public sector too quickly.

He told the BBC: "The Budget George Osborne introduced in June will result in people from lower-income groups suffering more.

"The problem that George Osborne has is that this government is slowly and surely being defined by cuts.

"He's trying to disguise that by talking about fairness... If you hit growth and jobs, that will result in unfairness."

'Stresses and strains'

TUC general secretary Brendan Barber said: "The chancellor has a different definition of fairness to the rest of us.

"His spending cuts are hitting the most vulnerable, his one big tax rise was VAT - the unfairest tax of all - and his economic policies are bearing down on the young, trapped between unemployment and an education sector with not enough places.

"Meanwhile, those in banks and finance who caused the recession are back collecting their bonuses and celebrating their biggest windfall, their escape from being asked to make a proper tax contribution to clearing up the mess they made."

Richard Lambert, director general of business group CBI, said: "There are lots of stresses and strains to come, and the government is going to have to work very hard to sustain business and consumer confidence in the difficult months ahead.

"But CBI members in general are taking a much more positive view of Westminster than was the case a few months ago."