The outlook for the UK economy is 'inherently uncertain' and recovery will be slower than after previous recessions, its tax and spending watchdog warned today.
The Office for Budget Responsibility said the impact of government deficit-busting measures - which include a hike in VAT to 20% and an £81 billion sterling package of spending cuts - would lead to 'sluggish growth' in the medium term
But the OBR - formed in May to make an independent assessment of public finances and the economy - did slash its projections for public sector job cuts over the next four years from 490,000 to 330,000.
The watchdog's forecast - which will provide the fiscal framework for the next budget in March - raised estimates for GDP growth in 2010 from 1.2% to 1.8%, but lowered growth in 2011 and 2012 from 2.3% to 2.1% and from 2.8% to 2.6% respectively.
This afternoon, British Chancellor George Osborne said the forecast showed that his government's plan to tackle the deficit was working.
In a Commons statement he announced that from April 2013 there will be a new lower 10% rate of corporation tax on profits from newly-commercialised patents to encourage hi-tech business.
He told MPs the move had prompted a £500m investment from pharmaceuticals giant GlaxoSmithKline which would create an estimated 1,000 new jobs.
