George Osborne 'has raised risk of double-dip' with emergency budget

Chancellor George Osborne has been warned by a high powered Commons committee that his budget could spiral Britain back into recession

George Osborne's emergency Budget has increased the risk of a double-dip recession, a powerful committee of MPs has warned.

In its first report on the Budget, the Commons Treasury committee said the tough package of tax increases and spending cuts unveiled by the Chancellor last month had made it likely that Britain would slip back into recession this year.

The findings from the Tory-dominated committee are embarrassing for the Chancellor, who brushed aside warnings from Labour that the Budget would send us back into recession and cost hundreds of thousands of jobs.

The report also questioned Treasury claims that society's poorest had suffered least as a result of the Budget.

Treasury sources last night pointed out that the committee believed the Budget had only 'slightly' increased the chances of a double-dip recession, adding that MPs also said the package had improved Britain's long-term growth prospects.

The committee said Mr Osborne had chosen 'more radical' action than Labour to tackle the budget deficit.



But it said there were 'risks on either side of the Budget judgment' - suggesting that some believe Mr Osborne should have gone even further.

The warning on the impact of the Budget came as MPs raised fresh questions about the independence of the new Office for Budget Responsibility.

The tax and spending watchdog was set up by Mr Osborne to restore public confidence in official economic forecasts after years of Labour spin.

But the OBR has been mired in allegations about its own independence

after cutting its forecast of public-sector job losses in the run-up to the Budget. Sir Alan Budd, its chairman, yesterday said that convincing the public and financial markets that the OBR was genuinely independent was now the organisation's 'core challenge'.

Sir Alan, who stunned Westminster and the City by announcing that he was quitting the OBR after just three months, said 'no one in their right mind' would want to replace him.

Treasury committee chairman, Tory Andrew Tyrie said the OBR had made a 'bumpy start'. Sir Alan responded: 'You refer to the bumpy ride. I have other words for it.'

He insisted the body had not been leaned on by ministers to alter its fore-casts.

He acknowledged recent events had made it harder to convince the public that the body was independent.

But he said the OBR, which will produce two economic forecasts a year, was likely to continue to rely on Government departments for at least 80 per cent of its staff.

It was unlikely ever to achieve 'total independence' from the Treasury.

Last night Mr Osborne tried to shore up the OBR's credibility by promising MPs the power to prevent him hiring and firing its chairman without their approval.

He said legislation would ensure the Chancellor could not sack the watchdog on a 'whim'.