Spectator warns that Osborne may be leading Britain into a "low-growth, high debt trap"

By Tim Montgomerie
Follow Tim on Twitter.

Earlier today I reported how George Osborne was warning his EU counterparts to follow the British model.

In a hard-hitting leader in tomorrow's Spectator Fraser Nelson questions the UK model. He warns that the lack of a growth agenda risks Britain falling into a low-growth, high debt trap:

"For now, his government can borrow as cheaply as Germany can, even though Britain has a Greek-style deficit and Italian-style levels of state spending. But market sentiment can change in an instant, as Italy and Greece are learning. The danger for Osborne is that these nervous markets begin to doubt Britain’s recovery plan: not so much his proposed cuts, but the growth he has promised. Where is it? The Chancellor has raised tax and let inflation rip — not exactly a recipe for recovery. The fear is that, very soon, markets may conclude that Britain, like Italy, has fallen into a low-growth, high-debt trap. Osborne should take this threat seriously. Many in Britain are beginning to ask what his growth strategy really is. Is he struggling to articulate one? Or has he struggled to think of one?"

The Spectator leader then sets out the beginnings of an action plan:

• Emergency tax cuts for the low-paid — funded by more ambitious savings on state spending — would be a good place to start.
• Much more needs to be done to encourage British people to take the jobs that are on offer.
• Regulation needs to be cut, too, a task that would be infinitely easier if David Cameron were to negotiate a looser relationship with the European Union. And if the eurozone does suffer a crunch, he would have a glorious opportunity to do just that.

Slower than expected growth is beginning to have serious consequences for UK borrowing. As a result of the sluggish economy the Centre for Economics and Business Research (CEBR) has predicted that the budget deficit is likely to be £25bn higher at the end of this parliament than the Office for Budget Responsibility (OBR) is currently forecasting.