Independent forecasts show the Government’s utter failure on growth and debt
Each month the Treasury publishes a roundup of the most recent forecasts of the UK by a few dozen independent economists, four times a year these include the medium term forecasts rather than just short term ones. Today’s release, with forecasts out to 2016, represents an utter disaster for the Government.
Comparing today’s forecasts to the latest OBR numbers gives some indication of the direction of travel.
The graph below shows the growth forecasts.
The OBR expected (as recently as March) growth of 0.8% this year followed by 2.0% in 2013. Independent economists now see a fall of -0.4% this year and growth of just 1.1% next year, they expect growth to be weaker all the way out to 2016.
This of course has serious implications for government borrowing – weak growth means higher unemployment, less tax revenues and higher social security spending. The impact is considerable:
The consensus view now is that the Government will be forced to borrow a cumulative £73.9bn more than it currently expects over the next four years.
Almost £75bn of additional borrowing to pay the price for the Government’s total economic failure.
But that’s ‘just’ £75bn compared to the March forecasts, which had already been extensively downgraded. Compared to the original June 2010 forecasts, the picture is even worse.
The Government now faces having to borrow a staggering £174.9bn more in the years 2012-2016 that it originally intended.
Those who oppose the government’s deficit reduction strategy and argue for stimulus are often accused of being in denial about debt. Today’s figures make clear it is the Government who are in denial. They argued that faster spending cuts and tax rises would tackle the deficit, instead they have made it worse.