Chancellor's growth predictions challenged
A leading economic forecasting group has put economic growth in the UK this year, and in 2003, significantly lower than the rate predicted by chancellor Gordon Brown in his Budget.
The ITEM Club, sponsored by Ernst & Young, said growth in the next financial year would be 1.8%, climbing to 2.8%, in 2003, compared with GDP figures of 2% to 2.5% and 3% to 3.5% for the respective years, as calculated by the Treasury.
This, the ITEM Club said, would lead to higher public sector borrowings, but should not affect inflation, provided the oil price remained stable.
In addition, the corporate sector would recover less rapidly then predicted by Brown.
The forecasting group also took apart the belief, expounded by the chancellor that he would maintain a ‘fiscal platform that was pro-stability and pro-growth’.
Professor Peter Spence, economic adviser to the ITEM Club said the Budget, with its 1% increase in national insurance contributions for April 2003, would act to ‘upset the balance of the economy’.
More positively, the increased spending on the public services – particularly the NHS – will help the much suffering manufacturing sector, increasing demand for its services.