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Growth is slowing, admits Osborne
George Osborne has been forced to acknowledge a grim picture of declining growth and rising unemployment for the UK over the coming years.
The Chancellor insisted he was still on course to meet his key targets of eliminating the UK's structural deficit within five years and getting national debt on a downward course as a proportion of GDP by 2015/16.
But his Labour shadow Ed Balls said the economy was flatlining and the country was suffering "all of the pain and none of the gain" at the Government's hands.
The Office for Budget Responsibility forecasts announced in the Autumn Statement put growth at 0.9% for this year and 0.7% for 2012 - sharply downgraded from 1.7% and 2.5% in the body's last forecasts at the time of the March Budget.
Growth is then expected to pick up to 2.1% in 2013, 2.7% in 2014, and 3% in 2015 and 2016.
Unemployment was forecast to increase from 8.1% this year to 8.7% in 2012 before falling back to 6.2% by 2016.
And the OBR warned that as many as 600,000 jobs could be lost in the public sector by 2015/16 - a dramatic 50% increase on its previous estimate of 400,000. By the following year, that number could have reached 710,000.
The Government is set to borrow ?111 billion more over the next five years than previously expected, with borrowing peaking at ?127 billion this year before declining to ?53 billion by 2015/16.
The structural deficit will not be eliminated until 2016/17, according to the OBR predictions - two years later than it forecast in March.
Mr Osborne announced a package of growth measures intended to boost GDP by encouraging investment in infrastructure, small companies and the regions and getting young people into work.
But he had few high-profile goodies for ordinary voters, simply confirming widely-trailed reports that he would hold rail fare increases down to inflation plus 1% and cancel a planned 3p rise in fuel duty, as well as providing free nursery care for 260,000 two-year-olds.
Pensioners will see a ?5.30-a-week boost to ?107.45 in their basic state pension and work-related benefits will be uprated in line with the unusually-high CPI inflation rate of 5.2% recorded in September.
But some of the money will be clawed back by holding down increases in elements of the tax credits paid to low-earners in work. And Mr Osborne announced that the pension age will be raised to 67 from 2026.
Mr Osborne issued a blunt warning to unions to call off strikes over public sector pensions planned for tomorrow.
He set the scene for possible future confrontation with the unions by announcing a review of public sector pay which could lead to widely varying rates for the same job in different parts in the country.
And he told public sector workers that annual pay rises will be limited to 1% for two years after their current pay freeze ends.
The Chancellor told MPs that his statement offered "leadership for tough times", rather than "promises of quick fixes and more spending that this country can't afford at times like this".
But Mr Balls said the OBR figures showed the Government's austerity agenda had been "entirely counter-productive and self-defeating".
"It's backfired," said the shadow chancellor. "We have had all of the pain and none of the gain."
you include pay and pension contributions."