A premature victory lap? Osborne triumphant as economy recovers

George Osborne has claimed victory over Ed Balls in the battle for Britain's economic future.

The chancellor used his first big speech of the new political season to exploit political advantage out of the return to sustainable growth he now believes is taking place.

He attempted to strike a cautious note but his speech, at a construction site in east London's Aldgate area, was nevertheless being viewed as a decisive attempt to finally dismiss calls for a 'Plan B' approach.

"The economic collapse was even worse than we thought. Repairing it will take even longer than we hoped," Osborne said.

"But we held our nerve when many told us to abandon our plan. And as a result, thanks to the efforts and sacrifices of the British people, Britain is turning a corner."

UK GDP was 0.7% in the second quarter of 2013 – a development which meant the British economy has now recovered more than half the lost output since its pre-recession peak.

Osborne fears a further crisis in the unstable eurozone, higher oil prices in the Middle East because of regional instability and stuttering growth in emerging markets could all impact on the performance of British GDP, however.

He is refusing to accept any diluting of the coalition's deficit reduction agenda is an option and will instead insist further difficult choices will have to be made after 2015/6.

"Of course, many risks remain," he added.

"These are still the early stages of recovery. But we mustn't go back to square one. We mustn't lose what the British people have achieved."

Conservative and Liberal Democrats will be hoping the recovery ends debate about whether or not the recovery could have taken place sooner had the coalition's austerity drive not slowed progress.

The speech sought to consolidate a shift in the economic debate in which shadow chancellor Ed Balls has accepted years of flatlining growth are now at an end.

"This is a hard, difficult road we have been following," Osborne continued.

"But it is the only way to deliver a sustained, lasting improvement in the living standards of the British people."

Labour leader Ed Miliband will use his speech at the TUC's conference in Bournemouth tomorrow to claim Osborne's self-congratulation "just shows how out of touch with ordinary families they have become".

The opposition's rhetoric is shifting away from a 'choked off the recovery' approach towards a focus on living standards, the battlefield which the party's senior strategists now believe the next general election will be fought.

"This is a recovery for the few. This is an unfair recovery," Miliband is expected to say.

"This is an unequal recovery. And an unequal recovery won’t be a stable recovery. It won't be built to last."