Monday, October 17

Economic growth to half

A new report has predicted that economic growth in the UK this year will be only half that predicted by the chancellor, Gordon Brown.

The Ernst and Young Item Club - which uses the Treasury's own economic model to make its forecasts - said on Monday that it expected growth to be just 1.6 per cent in 2005.

Gordon Brown estimated that the UK's GDP would expand by three to 3.5 per cent in his Budget in March, although he has since acknowledged that it is set to under-perform.

The chancellor will make updated forecasts in his pre-Budget report next month, but is set to blame rising oil prices and a global downturn for his miscalculation.

However the Item Club argued that problems had been apparent in the British economy this time last year.

Chief economic adviser Professor Peter Spencer said that Brown should blame himself as much as external economic shocks.

"The chancellor is blaming the UK economic slowdown on the recent spike in oil prices and the weakness of the European economy, but this is unrealistic," he said.

"The problems were plain to see at the time of last year's pre-Budget report in December, but instead of addressing them then, the Treasury chose to dress up the UK finances for the election."

He added on BBC Radio Five Live that Brown had not been "prudent".

"The simple fact is that he'd already run out of money this time last year," Prof Spencer told.
"But a prudent chancellor would keep some money in the bank so that he could do something about it."

The Item Club said it was "cautiously predicting" growth of 2.2 per cent next year, in contrast to the chancellor's last estimate of 2.5 to three per cent.

That would represent a small upturn but still leave the Treasury short of its estimated funds from tax revenues.
As with any downturn in the Economy smaller businesses will feel the impact hardest, particuarly in the retail sector where profit margins are thinner now than at any time in living memory.
Perhaps the policy free thinking zone of the Conservative party may yet wake up to the fact that some ideas on issues such as our nations economic future matter more than soap operan machinations, but judging by recent performance, I doubt it !

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