Davos 2013: Osborne says UK spending cuts to continue until 2017 24 January 2013 Last updated at 16:07 Chancellor George Osborne has said UK spending cuts must continue if the government is to retain credibility. His comments come as a rebuff to the International Monetary Fund's chief economist, Olivier Blanchard, who has called for the UK to slow down its austerity programme. "We have a credible and flexible debt reduction plan," said Mr Osborne. That credibility is very hard won and easily lost. He was speaking in an interview at the World Economic Forum summit in Davos, Switzerland. Mr Osborne said pension, education and welfare reform was helping to make the UK a more competitive economy, while cuts to corporation tax and higher-rate tax were making the country a more attractive place to do business. Such reforms would make the British economy "a winner in the global competitive race," he said, citing sectors such as aerospace, pharmaceuticals, financial services and the creative industries as "world beaters." But he said: "We do have to carry on with the cuts. We're not about to bring that programme to an end... [it] will go on until 2017. We are walking a difficult road but we are going in the right direction. Deficit reduction was necessary to show that the UK could "pay its way in the world," he said. The reforms were already beginning to have an effect, he argued, as evidenced by the fact that new company creation was "at its highest rate on record" and unemployment rates were falling. Reformed Europe Mr Osborne declared himself "relieved" that the UK did not join the euro, saying: "We are sceptical about the ever-closer union we were asked to be part of. I'm arguing for reform in Europe and Britain being part of a reformed Europe. On the need for banking reform, Mr Osborne maintained the government's position that ring-fencing retail banking from investment banking was necessary to prevent future government bailouts of failed banks. When you make mistakes you can't expect the taxpayer to bail you out. Let the market punish failure," he said.