Cameron put on spot by watchdog over austerity remarks

LONDON (REUTERS) - Prime Minister David Cameron suffered the embarrassment on Friday of his budget watchdog publicly challenging his claim the government's austerity agenda was not a factor behind Britain's dismal economy.

In a speech on Thursday, Mr Cameron said his deficit-cutting agenda was not responsible for the country's depressed growth rate which was instead caused by the financial crisis, the euro zone's problems and higher oil prices - a view he said was endorsed by the independent watchdog.

The Office for Budget Responsibility's (OBR) Chairman Robert Chote replied on Friday in a letter to the prime minister which it published on its website.

"For the avoidance of doubt, I think it is important to point out that every forecast published by the OBR since the June 2010 budget has incorporated the widely held assumption that tax increases and spending cuts reduce economic growth," Mr Chote wrote in the letter.

While it was unclear how much of a drag the government's belt-tightening had on the economy - and the factors cited by Mr Cameron were likely to have been factors - the OBR believed it had reduced growth over the past couple of years, he said.

Mr Chote's letter was seized upon by the opposition Labour party which has lambasted the government over its economic policies and said it must change course to return to growth.

Britain risks tipping into its third recession in four years after the economy shrank in late 2012.