Osborne says UK government is getting on top of budget deficit

London: The UK Chancellor of the Exchequer George Osborne said the government is reducing the budget deficit, though there is no quick fix to the economic problems.

With the UK struggling to climb out of its second recession in three years, concerns are mounting that Osborne will miss the Office for Budget Responsibility’s forecast for a budget deficit of £120 billion ($190 billion) for the current fiscal year. Prime Minister David Cameron said his government will stick with its deficit-reduction plans amid calls from the Labour Party opposition for a rethink.

In a television interview on the BBC’s ‘Andrew Marr Show’, Osborne insisted: “We are getting on top of the deficit. These are difficult times for the British economy; it’s a difficult time for the world economy, but our economy is healing.

“Britain’s economic problems are deep rooted, built up over many years. If there was a quick fix, or an easy road, I would be the first on it. There is no alternative easy road.”

The chancellor today said the government will bring in legislation that will speed up infrastructure development and take advantage of the low borrowing costs gained by the deficit reduction measures the government had taken. Based on 10-year government bond yields, the UK pays 1.46 per cent to borrow compared with 2.65 per cent in October last year.

The Treasury is also working on creating a public-sponsored bank to lend to small businesses, Osborne said.

“The weakness in our banking system is one of the biggest problems we’ve got,” Osborne said. “We do need to actively consider now, and actively work on as we are in the Treasury, a small business bank sponsored by the government. Small businesses are the innocent victims of the financial crash.”

Calls for the government to do more to spur the economy have intensified after the recession deepened in the second quarter and the euro-area debt crisis and the largest budget reductions since World War II undermine confidence.

The Confederation of British Industry and the British Chambers of Commerce both urged the government to act to foster growth this week as they forecast the economy will contract this year. The deteriorating outlook means Osborne will miss the Office for Budget Responsibility’s deficit-reduction forecasts until 2015, according to the chambers.

“We’ve cut the deficit by a quarter alread, and we are sticking to this course: rejecting the easy path; restoring sanity to our finances,” Cameron wrote in an opinion column published today in the Mail on Sunday newspaper.

“You cannot borrow your way out of a debt crisis,” he wrote. “We’re on a hard road to balancing Britain’s books.”

Chuka Umunna, Labour’s head business spokesman, said the opposition party would welcome a move by the government to announce new infrastructure projects.

“We would give an immediate boost to the economy,” Umunna said in an interview on the Marr show. “Unless you get people back into work, you can’t reduce your borrowing figures.”