George Osborne has rejected calls from the right-wing of the Conservative Party that he administer "shock therapy" to the economy in order to kickstart growth.
The chancellor came under pressure in the run-up to his Budget from the left, including Vince Cable, to borrow more to invest and from the right to impose deeper spending cuts as well as cut taxes.
However Osborne ignored both pieces of advice and decided to stick to his present course. Appearing before the Treasury committee today to explain his decisions, the chancellor said is approach was "the right one" and said there was no Plan B or even Plan C.
"Have our GDP numbers come in below what we hoped for a couple years ago? Yes it has," he admitted. "But there is not a single G7 finance minister who wouldn't say the same thing."
"There are a set of people who believe, they tend to believe this in good times and bad, the answer to both good years and bad is more public spending," he said.
In advance of the Budget, three former members of the Bank of England’s Monetary Policy Committee (MPC) launched a scathing attack on Osborne’s handling of the economy.
Speaking to The Huffington Post UK, economists Sushil Wadhwani, Adam Posen and David Blanchflower called the chancellor’s austerity measures "premature", “self-defeating” and "completely at odds with economic theory".
They argued that the UK is now in the midst of a Japanese-style 'lost decade' of economic stagnation and high unemployment.
However Osborne said following that advice would put at risk the UK's ability to "command the confidence of the rest of the world".
"This is not an academic exercise, this is a real time exercise involving real people and real jobs, I am not prepared to take big risks on the basis of particular academic theories," he said.
And the chancellor equally rejected calls from the right, implicitly including many of his own backbench MPs, that he should be more radical and cut spending and taxes even more.
"I equally get from some right-wing economist the argument we should have shock therapy for the British economy, I would argue the British economy has had enough shock therapy, three or four years ago," he said.
"If there was some magic solution to the problems this economy, or any of the other western economies face, I am sure it would have been found."Suggest a correction