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Fresh blow for Osborne as UK growth downgraded

The Chancellor's economic strategy under increased pressure .

George Osborne's economic strategy has been dealt a fresh blow after forecasting group, the Ernst & Young Item Club, claims that the UK economy has "stalled at a dangerous junction".

With unemployment peaking at 17 year high in August, Item's chief economic advisor Peter Spencer argues that the government needs to take proactive measures to protect jobs, including floating the idea of a reduction in national insurance contributions from younger workers.

Spencer said:

The unemployment figures really put the kibosh on the idea that the private sector will take up the slack from public-sector job losses . . The economy has stalled at a dangerous junction and we need new measures to put growth back on track.

Citing fears surrounding the eurozone debt crisis, the UKs growth prospects have been downgraded to 0.9 per cent this year, a 0.5 per cent drop than was forecast only three months ago. "It's worse than we thought. The bright spots in our forecast three months ago -- business investment and exports - have dimmed to a flicker," he said.

Despite posturing that there will be no variation in the government's hard-line deficit reduction strategy, the Chancellor will face renewed pressure to come up with new ideas to kick-start the ailing economy. The group suggests that lower debt-interest payments could enable the UK economy the flexibility it needs to renew its ever-faltering growth prospects.

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Is anyone prepared to solve the NHS funding crisis?

As long as the political taboo on raising taxes endures, the service will be in financial peril. 

It has long been clear that the NHS is in financial ill-health. But today's figures, conveniently delayed until after the Conservative conference, are still stunningly bad. The service ran a deficit of £930m between April and June (greater than the £820m recorded for the whole of the 2014/15 financial year) and is on course for a shortfall of at least £2bn this year - its worst position for a generation. 

Though often described as having been shielded from austerity, owing to its ring-fenced budget, the NHS is enduring the toughest spending settlement in its history. Since 1950, health spending has grown at an average annual rate of 4 per cent, but over the last parliament it rose by just 0.5 per cent. An ageing population, rising treatment costs and the social care crisis all mean that the NHS has to run merely to stand still. The Tories have pledged to provide £10bn more for the service but this still leaves £20bn of efficiency savings required. 

Speculation is now turning to whether George Osborne will provide an emergency injection of funds in the Autumn Statement on 25 November. But the long-term question is whether anyone is prepared to offer a sustainable solution to the crisis. Health experts argue that only a rise in general taxation (income tax, VAT, national insurance), patient charges or a hypothecated "health tax" will secure the future of a universal, high-quality service. But the political taboo against increasing taxes on all but the richest means no politician has ventured into this territory. Shadow health secretary Heidi Alexander has today called for the government to "find money urgently to get through the coming winter months". But the bigger question is whether, under Jeremy Corbyn, Labour is prepared to go beyond sticking-plaster solutions. 

George Eaton is political editor of the New Statesman.