Borrowing and unemployment are set to be higher than forecast and spending cuts to carry on to 2017, he admitted.

UK economy was now forecast to grow by 0.9% this year - compared with 1.7% forecast in March and 0.7% next year, down from the 2.5%.

In 2011-12 borrowing is now forecast to be £127bn - up from £122bn forecast in the Budget and, over five years, the government is expected to borrow £111bn more than predicted in March.  The OBR forecast that unemployment would rise from 8.1% this year, to 8.7% next year - before falling to 6.2% by 2016.

On the issue of public sector pay, TUC general secretary Brendan Barber said: "The chancellor's refusal to back a Robin Hood tax, and make nurses pay instead, speaks volumes about his values."Public servants are no longer being asked to make a temporary sacrifice, but accept a permanent deep cut in their living standards that will add up to over 16% by 2015 when you include pay and pension contributions. "The chancellor's refusal to back a Robin Hood tax, and make nurses pay instead, speaks volumes about his values.

"Public servants are no longer being asked to make a temporary sacrifice, but accept a permanent deep cut in their living standards that will add up to over 16% by 2015 when you include pay and pension contributions."

Insufficient measures in the Housing Strategy to stimulate wider economic recovery - Nick Raynsford MP, former Labour Construction Minister (Courtesy, Building Magazine 25.11.11)

This week's announcement of a new government housing strategy is an admission of just how badly the housing market has been performing recently. The figures speak for themselves. Output has plummeted from 207,370 net additions to the housing stock in 2007/8 to only 121.200 in 2010111. This is not just the lowest level on record, but also only half the number required to keep pace with demand.

Even more worrying is the lack of growth over the past year. The start of recovery that we saw in late 2009/early 2010 was abruptly halted by the government's austerity budget
in summer 2010, since when the market has been stagnant. There are four reasons. First is a widespread lack of confidence in the economy, and specifically the housing market. People who are fearful about their job prospects are unlikely to risk buying a home or moving into a new one.

Even where people are prepared to take the risk, the highly restrictive policies currently being operated by the mortgage lenders represent a serious barrier. Unless people are able to put down a 25-30% deposit, they are likely to face prohibitive interest rates.

The third key factor is the government's maladroit meddling with the planning system, which has resulted in a collapse in planning consents for new homes. Only 25,171 homes were consented in the latest quarter, 23% down on the previous year, and massively below the level required (60,000 a quarter) to meet demand.

To add insult to injury, the deep - 60% - cut in the Homes and Communities Agency's housing investment budget will seriously affect the levels of affordable and social housing that can be anticipated over the next few years. The house building pipeline takes a relatively long time to work through, so we are still seeing the completion of social and affordable homes planned and funded under the last government. However, as that pipeline runs out, we will be left dependent on the very uncertain prospects of the new so-called affordable housing programme which is predicated on much higher rents (up to 80% of market rents) to offset the much reduced government grant.

The present government's high rent policy is a return to the approach adopted in the eighties when housing benefit was expected to "take the strain". But this time the government is cutting housing benefit at the same time as higher rents are making low income households more dependent on it. No minister has been able to explain how these two policies pointing in opposite directions can possibly work together.

So, the housing market is in trouble, with no immediate prospect of recovery, and current housing and planning policies are making the problems worse not better. Clearly there is a need for a new approach. But will this week's announcement make a difference?

One element in the new strategy should certainly help. The mortgage indemnity scheme directly addresses the problem facing first-time buyers without substantial funds for a deposit. This could well help to increase sales to this group of potential buyers.

But on the other points the new strategy falls short. There are insufficient measures in it to help stimulate wider economic recovery, or to reverse the rising tide of unemployment which is casting such a long shadow over the housing market.

The planning system is mired in uncertainty and will remain so until the government accepts the need to rewrite the deeply flawed National Planning Policy Framework.

Social and affordable housing output will also remain on a downward trajectory without adequate direct funding for councils and housing associations. The various initiatives announced this week - the umpteenth announcement on the release of public land, yet another empty homes initiative and the over-hyped and underperforming New Homes Bonus - will not make a significant difference.

But the greatest cause of concern is that the housing minister Grant Shapps is completely out of touch with what is actually happening on the ground. For him to claim that "house building starts are up by a quarter", at a time when they have fallen below 100,000 a year, and when his own department's figures show they are down 7% in the latest 12 months, is an indication of the problem.

Until the minister wakes up and smells the coffee, rather than deluding himself that things are better than they appear, we are unlikely to see a serious and credible response to the huge challenge we face.

On the BBC 4 Today programme on Monday, 21 November Ed Balls, the shadow chancellor, described the government's £400m "Get Britain Building" fund as "small beer".

He said I'm afraid it's rather small beer in its scale, it's a £400m boost when George Osborne last year announced a £4bn cut in housing spending, and we've proposed building 25,000 homes this year and next using the bank bonus tax, which would be considerably bigger boost to jobs in the construction sector. But at least it starts to show that David Cameron and George Osborne have realised that unless you act to get growth and jobs in our economy, you can't get the deficit down, and so I think it probably does show that at last the Government is starting to shift.

Bishops sign open letter criticising welfare reforms (BBC News 20 November 2011)

Eighteen Church of England bishops have signed an open letter, criticising the government's proposed welfare changes.
In the letter, in The Observer, the bishops express concerns about plans to limit the amount any household can claim in benefits to £500 a week.
Their intervention has received the backing of the Archbishop of Canterbury and the Archbishop of York.

The bishops say the cap could be "profoundly unjust" to children in the poorest families and they have a "moral obligation to speak up for those who have no voice".
They are backing a series of amendments to the Welfare Reform Bill - due to be debated in the House of Lords on Monday - which have been tabled by the Bishop of Ripon and Leeds, Rt Rev John Packer

Coalition sheds crocodile tears over young jobless (The Guardian, 16 November 2011)
Youth unemployment has risen above 1 million, but the eurozone crisis and slow global growth aren't to blame - the coalition is

Britain's jobless rate hit a 15-year high of 8.3% percent in the three months to September, when youth unemployment surged past one million people for the first time.
It was clear Wednesday's jobless figures were going to be bad when it was announced that David Cameron was holding a breakfast summit at Downing Street to discuss youth unemployment.
Sure enough, the news released by the Office for National Statistics was dire. Unemployment rose at its fastest rate on the internationally agreed measure for almost 17 years, employment fell even more precipitously and – surprise, surprise – the number of young people out of work rose through the politically sensitive 1 million level.
The government's response was equally predictable: to blame the crisis in the eurozone and slower growth in the global economy, to shed a bucket load of crocodile tears and to pledge action to find jobs for young people.
But the explanation provided by the coalition is bogus. Unemployment is what is known as a lagging indicator of economic performance; it takes time for a slowdown in activity to feed through into the jobless figures.
Europe's crisis only really moved into its new, dangerous phase in late July and August, and would not have had any impact on the employment data, which covers the period from July to September.
Indeed, the evidence is that the labour market has been steadily weakening throughout 2011, with a marked deterioration over the past three or four months. A much more plausible explanation for the drop of almost 200,000 in employment in the three months to September is that the domestic economy is suffering from the intense squeeze on real incomes caused by high inflation, rocketing fuel bills and increases in taxes.
Here's the reality. The government inherited an economy in which unemployment was coming down. It is now going up. The government inherited an economy where schemes to help young people into work were nibbling away at youth joblessness. It scrapped schemes such as the Future Jobs Fund to save money, making its current hand-wringing particularly inappropriate.
When he announced his austerity programme shortly after becoming chancellor, George Osborne insisted that job losses in the public sector would be far outweighed by the opportunities that would be created by a liberated and thriving private sector.
Wednesday's figures give the lie to the chancellor's breezy optimism: 111,000 jobs were shed by the public sector in the three months to June, while 41,000 were created in the private sector. And this, note, was the three months to June. It was only subsequently that the big deterioration in the labour market took place.

Tories are wrong to fear reaction to growth plan, Labour insists (The Guardian 13 October 2011)
Markets will not react negatively to an emergency budget to boost economy nor will UK lose AAA credit rating, says Ed Balls.  Ed Balls, the shadow chancellor, insisted on Thursday that credit ratings agencies would not downgrade the UK economy if Britain adopted an emergency growth budget to boost industry and jobs.

The Tories insist the extra spending inherent in Labour's five-point plan for growth and jobs would lead to a downgrade by credit rating agencies, reaction in the bond markets, higher interest rates and costlier mortgages. Balls said such claims, advanced by the chancellor George Osborne, were "a politically convenient argument, but it is economic sophistry and nonsense".

At a joint press conference with Labour leader Ed Miliband designed to launch a sustained assault on the Tory economic record, Balls claimed Osborne had been reduced to arguing "however bad it gets, any change of course will make things even worse because it will reduce credibility". He said there was no evidence that markets would react negatively if Osborne implemented a form of plan B. Both men pointed out that the IMF director general, Christine Lagarde, had warned that stock markets fear lack of growth just as much as they fear borrowing.

Labour is proposing a bank bonus tax to fund 100,000 jobs for young people; bringing back long-term investment projects; cutting VAT temporarily; cutting VAT to 5% on home improvement repairs and a one-year national insurance tax break for every small firm taking on extra workers.

Lack of a plan for growth in UK - Shadow Chancellor, Ed Balls (Courtesy: The Guardian Friday, 5 August 2011 guardian.co.uk)

In a speech last August, I warned of the perfect storm of factors that were facing the world economy and threatening to choke off its nascent recovery.
Twelve months on the winds of the storm are rising fast. And, just as in 2008, the storm is hitting from all sides: the eurozone in crisis; America in political paralysis; the pace of China's growth slowing; and markets across the world in turmoil, including in Britain.
What we need to see now is political leaders across the world getting a grip on this crisis and putting in place a plan for global growth, open trade and sustainable deficit reduction – in Europe, in the US and in the UK. In the 1930s, the world economy faced a global crisis on this scale and political leaders failed to rise to the challenge, and today my fear is that history is repeating itself.
In my speech last year, I highlighted the catastrophic government mistakes of the 1930s depression:
• Ignoring the needs of jobs and growth, and abandoning any policies to support them
• Insisting there was no alternative, and no policy that mattered, except rapid deficit reduction
• Believing that market confidence depended solely on deficit reduction even as the markets were collapsing due to the absence of growth
• Ploughing on even when the evidence showed the plan wasn't working and the fiscal position was getting worse.
Yet these are the very same mistakes that I fear are again being made. Because it is the absence of growth – in the US, in Europe and in Britain too – and the absence of a credible plan to get our economies growing again that is undermining confidence and has sent equity markets plummeting in recent days.
The idea that Britain – which has not grown for the last nine months and whose markets have fallen in the last 48 hours – is a safe haven or "not in the firing line", as the foreign secretary, William Hague, claimed, is not only complacent but patently absurd.
The government needs to recognise that what we need in Britain, and across Europe, is a plan for growth. Without growth it will not be possible to get deficits down in a sustainable way. That is why the IMF and the government's own watchdog, the Office for Budget Responsibility, have issued warnings in recent days.
Yes, things would be worse for Britain if we were in the euro. But it is deeply complacent to see this crisis as just a crisis of the eurozone, or a failure of small countries to cut spending fast enough.
This is now a truly global crisis – as continued de-leveraging by banks and the private sector, amid fears that the eurozone crisis is spreading northwards, is meeting a premature fiscal retrenchment from governments around the world and a drastic tightening of consumer spending: these three pillars of demand and growth are being ripped away at once.
Of course public borrowing will need to fall steadily over the coming years. But countries with aggressive deficit-reduction strategies but no prospects for growth now risk finding themselves trapped in a vicious circle of investor flight and slower growth, making it harder to get deficits down, and hitting market confidence.
So what needs to be done? In Europe, it is now desperately urgent that political leaders get a grip. The approach so far, simply kicking the can down the track and putting in place more austerity, won't work because it will do nothing to get growth moving – without which countries will find it hard to convince the markets they can repay their debts.
Facing up to the scale of the challenge and putting in place the necessary measures to draw a line under this crisis means doing two things now. First, the eurozone must put in place a plan for growth. That means stepping back from simply calling for more and more austerity. It means delivering export-led growth for countries beyond Germany – not shrinking demand for those countries with a collective rush to austerity.
Second, to stop the contagion, the eurozone must accept that some form of euro-area guarantees are now inevitable and that support must be there from the euro area for Italy and Spain, as well as for smaller countries like Greece.
In America, too, a credible deficit reduction plan requires the US economy to be growing and creating jobs. Recent developments in America remind us that to be credible a deficit plan needs political agreement – which has been the problem in the US in recent weeks.
But political agreement is not enough, it also needs to work. That is why I am fearful that Republican congressional leaders have learned the wrong lesson from the British experience over the past 12 months.
The lesson from the UK is that George Osborne's plan – trying to go too far and too fast with a plan driven by a political timetable rather than sensible economics – isn't working. Last year's recovery has been choked off, when it should have been secured.
The danger for the US is that, just like the UK, worries about deep cuts, before the economy is seeing a strong recovery, hit confidence of consumers and investors leading to slow growth which makes it harder to get the deficit down.
But there is another lesson from the 1930s, one that we assumed had been learned and fixed for good. Never again, that generation said, would the world face an economic crisis and respond with isolationist politics. We would recognise the need for global coordination and agreed action, including on global trade, not sit in our bunkers hoping the storm would pass.
That is why I find it so worrying that the British government is absent from the global economic debate at this critical time. A year ago I argued that while Britain could never isolate itself from these forces, the Conservative-led government did have a duty to prepare for them, and build up our defences.
Instead it did the opposite: withdrawing government support for jobs and growth, hitting consumers with tax rises and stoking high inflation. It was like ripping up the foundations of the house before the hurricane hits.
A year ago, coalition politicians preferred to believe Osborne's confident claims that his rapid deficit-reduction strategy was not only essential but desirable, clearing the path for a strong, private sector-led recovery.
But that reckless confidence has now given way to staggering complacency. In recent weeks we have seen Osborne describe 0.2% growth in the last nine months as "positive news". He boasts about Britain's falling bond yields, not apparently realising that this is reflecting a collapse in market expectations for growth.
And at the beginning of this week, with the chancellor on holiday, the Treasury talked of Britain as a "safe haven" for investors - just before successive days of losses wiped billions off the stock market.
Beyond Osborne's office, where flat-lining growth is treated as an irrelevance, there is a genuine debate raging about how to get the UK economy back on track.
But whether you believe in a plan B, a plan A plus or a wholly different approach, we can surely agree on this: things cannot go on as they are, the world is desperately in need of strong and united leadership in the face of this new crisis, and we need our political leaders to step up to the plate.
On every occasion in recent decades when the world faced economic turmoil, it was the British chancellor at the head of the table, knocking heads together and coordinating the response.
We led the way on global financial reform after the Russian default; we were at the centre of world efforts to stabilise the world oil price after the Iraq war; and most notable of all, it was the UK which led the global response to the 2008 banking crisis and stopped the collapse of Lehman Brothers escalating into a world depression.
And the same was true under Conservative governments. Even when it was already clear that Britain would not join the first wave of the euro, Ken Clarke banged the table to get the EU stability pact agreed at the 1996 Dublin summit.
Outside the eurozone, and – unlike the US, France and Germany – without imminent elections to worry about, the UK government should once again be leading the way, because whether the eurozone gets its act together matters hugely for British jobs and pensions.
Instead, there is a gaping hole where British leadership should be. That is not just the result of ill-timed and badly coordinated holiday plans; it is symptomatic of 15 months in government that have not only left the British economy weak and vulnerable, but also made zero contribution to global economic discussions.
Instead, trapped by its own political ideology and unable to admit the need for a change of direction, this government prefers to believe this is just a crisis of the eurozone and the US and that Britain need not worry. David Cameron and Osborne should be taking the lead. Instead, we hear only a complacent and deafening silence.

Credit rating agency Fitch said that the new fiscal projections signal a "significant deterioration" in the UK economy since March, and warned that the country's ability to absorb future shocks while keeping its AAA rating intact is now "largely exhausted".
Fitch also calculated that the UK will soon be the most indebted of all AAA-rated countries after the US.
The deterioration in the economic and fiscal outlook implies that net public sector debt will peak at 78% of GDP compared to the previous OBR forecast of 70% in 2014-15. On a broader measure of government debt used by Fitch in international comparisons, the UK government will become the most indebted of any 'AAA'-rated sovereign with the exception of the US. UK government debt is on this measure projected by the OBR to peak at 94% of GDP and compares with Fitch projections for Germany and France of 83% and 92% respectively

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