Chancellor urged to stick to debt reduction plans

The OECD has backed George Osborne's plan to reduce debt, but warns that the economy will stagnate.

The Chancellor of the Exchequer, George Osborne, has been advised by the Organisation of Economic Co-operation and Development (OECD) to stand firm on his debt reduction plans, in spite of their warning that the economy will stagnate.

The economic thinktank believes that the recession is not over, the Guardian reports. Chief economist Pier Carlo Padoan said, "Growth is turning out to be much slower than we thought three months ago, and the risk of hitting patches of negative growth has gone up."

UK economist Alan Clarke, of Scotia Capital, expressed surprise at the OECD's "grim" forecast of 1.4 per cent growth this year: "This is likely to reinforce pessimism if the usually pretty conservative OECD is now more pessimistic than the most pessimistic amongst us."

Padoan stressed that the Chancellor should stand by his deficit-cutting programme, rather than implementing Labour's plan of temporarily cutting VAT to stimulate growth.

Shadow Chancellor Ed Balls called the OECD's forecasts for the next six months "extremely concerning" and blamed the UK's slow economic growth on Osborne's decision to "cut spending and raise taxes too far and too fast".