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		</div><p><a href="http://londonglossy.com/wp-content/uploads/2011/02/osborne-needs-a-plan-b-on-economy.jpg"><img class="alignnone size-full" title="Chancellor George Osborne should have an 'alternative plan' for the economy, a think-tank has said" src="http://londonglossy.com/wp-content/uploads/2011/02/min-osborne-needs-a-plan-b-on-economy.jpg" alt="Chancellor George Osborne should have an 'alternative plan' for the economy, a think-tank has said"/></a></p>
<p>Chancellor George Osborne should prepare an &#8220;alternative plan&#8221; for the economy in case his austerity package of spending cuts and tax hikes fails to balance the books, a respected economic think-tank has said.</p>
<p>In its annual Green Budget, the Institute for Fiscal Studies gave a broad endorsement of the Chancellor&#8217;s approach and said he would be wrong to use his March 23 Budget to seek to sugar the austerity pill with tax and spending giveaways.</p>
<p>But it warned that Mr Osborne may miss his target of eliminating the deficit over the next four years, due to &#8220;sluggish&#8221; GDP growth and the &#8220;formidable&#8221; difficulty of delivering cuts on a scale not seen since the Second World War.</p>
<p>The Chancellor was right to resist calls to change course in response to last month&#8217;s disappointing growth figures &#8211; which showed GDP shrinking by 0.5% in the last quarter of 2010 &#8211; but should spell out what his plans are if the economy takes a further turn for the worse, said IFS director Paul Johnson.</p>
<p>&#8220;I think it&#8217;s quite right that on the basis of one poor month&#8217;s figures they&#8217;re not changing course, but they really ought to set out what they will do in the face of a significant change in the economy and a significant difference,&#8221; said Mr Johnson.</p>
<p>&#8220;I think it&#8217;s rather important actually that we do know under what circumstances they will change their policy.&#8221;</p>
<p>Among industrialised nations, only Greece was seeking to reduce its deficit at a rate as fast as the UK, and only Ireland and Iceland were cutting public spending so quickly, the report said.</p>
<p>Planned cuts totalling £81 billion were more ambitious than those imposed by John Major&#8217;s administration in the 1990s and might prove &#8220;formidably hard to deliver&#8221;, particularly in services such as the police where manpower reductions will be &#8220;difficult to achieve cost-effectively on the proposed timescale&#8221;.</p>
<p>Meanwhile, growth over the medium-term is likely to be lower than predicted by the Office for Budget Responsibility (OBR), whose forecasts are used by the Chancellor to plan his Budget.</p>
<p>Labour&#8217;s shadow chief secretary to the Treasury Angela Eagle said: &#8220;The IFS report is right to warn about the serious risks to growth that our economy faces and that without growth George Osborne won&#8217;t meet his own deficit reduction targets. It&#8217;s time he heeded those warnings and got himself a plan B.&#8221;</p>
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