NEWS
26/07/2011 04:10 BST | Updated 24/09/2011 06:12 BST

Figures Expected To Show Economic Growth Is Slowing, Adding Pressure On Government

PRESS ASSOCIATION -- Pressure on the Government to announce a "plan B" for the economy could increase if, as expected, official figures show that the economy has slowed sharply or gone into reverse.

City forecasts of 0.5% growth in GDP for the last three months have been trimmed back by most economists to about 0.1% or 0.2%, with some predicting the Office for National Statistics figures could show the economy contracting.

Ahead of the figures Prime Minister David Cameron insisted that there was no leeway for fiscal stimulus through tax cuts or public spending increases, or monetary stimulus in the form of the Bank of England reducing interest rates or printing money.

Asked whether tax cuts or quantitative easing were options, the Prime Minister replied: "There's no country, really, that can afford another fiscal stimulus. They've all run out of money.

"There isn't some great monetary stimulus you can give when interest rates are as low as they are. The right step for an economy like ours is to get on top of your debt and your deficit and then make it a better place for businesses to grow and expand and employ people."

Labour has been calling for an economic plan B, insisting that the Government's policy of using tax rises and spending cuts to eliminate the national deficit by the end of the Parliament risks choking off growth by cutting "too far and too fast".

They point to earlier ONS figures showing a decline of 0.5% in the final quarter of 2010 and growth of 0.5% in the first three months of 2011 as proof that the economy has been "flatlining" since the coalition came to power.

Weak figures from the ONS would heap more pressure on Chancellor George Osborne to come up with an alternative strategy. But Mr Osborne has insisted his tough deficit reduction plan has been "vindicated" by events.

The "very difficult decisions" of the past year had not made him popular politically, but had been "justified" by the low interest rates and strong credit status which resulted, he said. And he dismissed suggestions he had acted in a "reckless" way, saying: "I think I am taking the right decisions that anyone in my position would have to take."

Howard Archer, chief European economist at IHS Global Insight, said he expects the GDP number to make very disappointing and worrying reading.