Budget: CIPD stick the boot in
We don’t alway agree with the CIPD, but there’s some strong words from their chief economist – and labour market expert – John Philpott today:
“The Chancellor has introduced what must surely rank as the most astonishing UK budget statement in modern times. Mr Osborne’s combination of £32 billion additional spending cuts by 2014-15 and an £8 billion net tax hike amounts to an unprecedented fiscal squeeze, including an extremely severe clampdown on the welfare bill. Yet both he and the independent Office for Budget Responsibility (OBR) reckon there is a greater than evens chance that the government will meet what the Chancellor calls its ‘fiscal mandate’ with barely any serious short-term impact on economic growth and employment.
“Although the OBR has downgraded its pre-Budget economic growth forecasts in the light of Mr Osborne’s austerity measures, and become a bit more pessimistic about jobs, the suggested outlook for the economy is nonetheless remarkably rosy, with investment and net exports more than making up for weak household spending and a big drop in public spending. The Chancellor could hardly have asked for more had he and his Treasury team stuck with tradition and come up with the forecast themselves.
“One suspects, however, that the forecast outlook will prove too good to be true. The fiscal squeeze both at home and across the eurozone will curb the demand for the goods and services that ultimately drives business investment and exports. Economic growth will slow by far more than today’s budget suggests and, rather than peaking at 8% this year, unemployment will continue to rise toward 3 million (10%) by the time Mr Osborne’s measures take full effect. This will add to public borrowing and debt, not reduce it. The 2010 Emergency Budget is not the beginning of the end of the UK’s post-recession economic difficulty but the start of a period of painfully slow growth, falling living standards, and prolonged high unemployment.”