Apr 2009 22

The growth forecasts in the Budget4

There should be a health warning on the Chancellor’s forecast; “Do not believe.”  Fair enough, the fall in UK GDP of 3.5 per cent for 2009 looks reasonable but, for the economy to achieve growth of 1.75 per cent in 2010 it would require an extraordinarily vigorous bounce back, which is simply not credible.  Why?  Because the reasons for much of the growth leading up to the financial crisis, buoyant public spending and a rapid increase in consumer indebtedness, cannot be replicated.

Moreover, growth rates of 3.25 per cent in 2011 through to 2013 should not be regarded as realistic forecasts, they should be regarded as illustrative assumptions- nothing more and nothing less.

Given these over-optimistic GDP figures, the implications for the public finances are serious.  The current projections are bad enough, the actuality will be far worse, unless a scalpel is taken to public spending.  But the Chancellor knows he will not be the man to do it.

The Chancellor has fudged the issues, kicked them into the long grass and left the nasty work to his successors.

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  • Hardeep Singh

    I agree Ruth all part of the scorched earth policy. Business as usual to sneer at the successors as the party of cuts, typical Labour when they get it wrong their only viable solution is to berate and mud sling the anyone else who doesn’t agree.

  • http://waddell.wordpress.com/ David Waddell

    Hasn’t this been an issue for years? I mean the govt getting it’s growth forecasts wrong. Every time, it makes them look stupid twice: once when it’s out of step with other forecasters and once when the proof arrives. Might it not be better to rely on an independent forecast, much like it now relies on independent statistics?

  • Diogenes

    Have we been mis-sold a Budget? Is this the largest misselling scam about – or just within the bounds of forecast error?

  • Lola

    “…unless a SCALPEL is taken to public spending” Scalpel? Scalpel! More like an effing great chainsaw.