"George Osborne is operating in difficult economic circumstances, but this is still a disappointing response. He has effectively ditched Plan A and embraced Plan A minus.

"He is not sticking to his deficit reduction policy. He is sticking to his spending policy. There's a world of difference. The initial plan was to add £260bn to the national debt between now and the next election. That has now spiralled to £350bn.

"If growth and tax receipts are less impressive than initially thought, there needs to be a corresponding reduction in state spending. But the only major spending cut spelt out today – a reduction in the retirement age – doesn't kick in until 2026.

"Additionally, upgrading many welfare benefits by a full 5.2% while wages remain flat will not help to incentivise people to enter the workforce.

"The Chancellor conceded that a possible recession in the eurozone could further worsen economic conditions here, but did not signal a readiness to introduce deeper cuts in spending should this occur. It will be difficult for him to retain his hard-earned credibility in the markets should he fail to indicate that further reductions in spending may be necessary."

Prof. Philip Booth, Editorial Director of the Institute of Economic Affairs, said:

"The facts have changed but the policies have not. Despite the deterioration in the economic outlook, the government is not reducing its spending further, therefore putting more of a burden on the private sector of the economy through higher government borrowing and further delays to meaningful tax cuts. Furthermore, the uprating of benefits whilst real wages are falling further sharpens the disincentive effects of our dysfunctional benefits system. This, together with other unnecessary spending announcements, suggests that the government wishes to "coast" rather than address the difficult challenges that the world economy is throwing at it."