Economy grows by just 0.2%

By Mark Ferguson / @markfergusonuk

The economy grew by just 0.2% in the last quarter.

We’ll bring you the Labour reaction throughout the day.

Update: Ed Balls has responded to the growth figures, saying:

“These figures show that last year’s recovery has been recklessly choked off by George Osborne’s VAT rise and spending review. The economy has effectively flatlined for nine months and this is very bad news for jobs, living standards, business investment and for getting the deficit down.

“Just 0.2 per cent growth over the nine months since this government’s spending review and VAT rise compares to 2.1 per cent in the previous nine months when the economic recovery was taking hold. Every other major economy in the world has faced challenges like high world oil prices but their economies have continued to recover while Britain has barely grown at all over the last nine months.

“At a time of global uncertainty, George Osborne’s rash decision to hike up VAT in January and cut further and faster than any other major economy has caused confidence to fall and the economy to flatline since the autumn. He ripped up the foundations of the house as the global economic hurricane was brewing – undermining our recovery well before the recent problems in the Eurozone and America and leaving us dangerously exposed if things now go wrong there.

“What is even more worrying still is George Osborne’s breathtakingly complacent response to today’s figures. This is a Chancellor who is in total denial. Even Downing Street now realise that urgent action is needed to get our economy growing again, but the Chancellor just thinks we should carry on regardless with no credible plan for growth. Instead of clutching at excuses like too much snow in winter and too much sun in the spring George Osborne needs to realise he only has himself to blame for the choices he made a year ago.

“Families, pensioners and businesses can feel that tax rises and spending cuts which go too far and too fast are hurting, but it’s increasingly clear that they aren’t working. The slower growth and higher unemployment this government’s policies have delivered are creating a vicious circle with borrowing already set to be £46 billion higher. It’s now almost certain that George Osborne’s growth forecasts will be revised down for a fourth time, which will mean government borrowing is revised up once again.”

Balls also called for a change of course, adding:

“The cautious thing to do is to change course before it is too late, not to plough on with a reckless gamble which doesn’t seem to be working. The Chancellor should start listening not just to me, but the IMF and the Federation of Small Businesses who have also called for temporary tax cuts if slow growth persists.

“Temporarily reversing the VAT rise, which is costing families with children £450 per year, would give our stalled economy the jump start it urgently needs and so help get the deficit down for the long term. The government also needs to get the banks lending to small businesses and use the funds raised from repeating the bank bonus tax to get young people off the dole and into work.

“After the global recession we’ve got to get our deficit down and that means tough decisions on tax and spending cuts. But it’s now increasingly clear that we need a more balanced deficit plan that puts jobs and growth first. We need a plan for the long-term future of our country which recognises you can’t get the deficit down in a sustainable way without strong growth and more people in work.”