Chancellor likely to give up debt reduction target

CHANCELLOR George Osborne will miss a key debt target unless he delivers new measures in his forthcoming mini-budget, the European Commission warned yesterday.

The government is unlikely to be able to reduce debt as a share of gross domestic product (GDP) by 2015-16 in the light of recent public finance figures, the EC said.

Mr Osborne will be forced to take action, such as further spending cuts or tax rises, in his Autumn Statement in December if the target is going to remain a possibility.

However, it is now widely expected that the Chancellor will admit the goal can no longer be achieved.

The EC added that the “hard to explain” resilience of Britain’s labour market is unlikely to remain so buoyant in the coming months, with the unemployment rate expected to peak at around 8 per cent in 2013.

The bleak assessment came as the EC slashed its growth forecast for 2012, from growth of 0.5 per cent to a 0.3 per cent decline, as low consumer spending and eurozone turmoil take their toll.