Ease off on austerity, IMF warns Chancellor George Osborne He said: "This is a challenge that doesn't necessarily go away. Going forward there's a need to keep an eye on this subject. Vince Cable, the Business Secretary, yesterday acknowledged that the government's biggest challenge over the next year is balancing the need to stimulate growth while maintaining confidence in the money markets about the debt programme. "We started off aiming to deal with the structural deficit in four years and we've now said we'll deal with it in six because the economy has slowed down making it more difficult," he said during a debate at the Cheltenham Literature Festival. Last week the IMF slashed this year's growth forecast for Britain by 0.6 percentage points - the biggest downgrade for rich nations - and said the economy would contract by 0.4pc. Next year's growth prediction has been cut from 1.4pc to 1pc. Mr Osborne arrives back from the IMF meeting to a more optimistic forecast today from the Ernst & Young Item group. It expects growth of 0.7pc in the third quarter this year to limit the full year downturn to 0.2pc and is looking for a housing market recovery to help the economy grow by 1.2pc next year. But it added that it still involves the "wrong kind of growth," relying not on exports as hoped but on consumer spending and a recovery in the housing market, and there are mixed indicators from other surveys released today. Lloyds TSB says the squeeze on spending power resulting from the inflation rate outstripping pay rises has deepened with consumers having around £100 less than a year ago to buy non-essentials.