How much growth will the ‘most pro-growth budget for a generation’ create?
Despite David Cameron’s claim that the Budget would be the most pro-growth for a generation, the OBR have a less positive view. As well as downgrading growth for 2011 (for the second time since the election – their November forecast also cut 0.2 points off projected GDP) their forecast states that:
We do not believe there is sufficiently strong evidence to justify changing our trend growth assumption in light of policy measures announced in Budget 2011.
It seems that Enterprise Zones aren’t going to save the UK economy.
It’s also interesting that while the forecast does not include the impact of the increased corporation tax cut (the OBR were not notified in enough time), they do feel able to state that they believe any second round effects it will have on the economy will be ‘minimal’.
Today Moodys have reportedly stated that “slower growth combined with weaker-than-expected fiscal consolidation could cause the UK’s debt metrics to deteriorate to a point that would be inconsistent with a AAA rating”. With unemployment rising, consumer confidence falling through the floor and the fastest and shapest fiscal consolidation for decades about to hit, it seems that the Prime Minister may need to reconsider his claims.