Even former US President Bill Clinton weighed in, pointing to the Britain’s difficulties as proof that a country cannot bring down its deficit if its tax base shrinks because of spending cuts and a poorly performing economy.
His remarks coincided with a report by the independent National Institute of Economic and Social Research (NIESR) that the British economy slowed to near-stagnation in the second quarter of this year as the underlying rate of expansion remained very weak. It said it did not expect the economy to match 2008 levels until at least 2013 – a conclusion already reached by many trade union economists and forecasters.
The NIESR’s near zero growth consensus was shared by economists at the British Chambers of Commerce, Citigroup, Barclays, RBS, Scotia Capital, JP Morgan and the CEBR.
The Centre for Economic and Business Research (CEBR), some days after Mr Clinton and the NIESR, went even further and said that neither the Chancellor nor Prime Minister David Cameron appeared to fully understand just how “precarious” a position Britain is in because of weak bank lending, slower exports, and sluggish consumer spending and a growing deficit.
The NIESR said gross domestic product grew 0.1 per cent in the three months to the end of June, after expanding 0.5 per cent in the three months ending in May. Official data says the economy grew by 0.5 per cent on a quarterly basis during the first three months of 2011.
Angela Eagle, Labour’s Shadow Chief Secretary to the Treasury, said the economy needed to grow 0.8 per cent in the second quarter to meet the Office for Budget Responsibility’s forecast of 1.7 per cent growth in 2011.
“Without strong growth, it will be much harder to get the deficit down”, she said The CEBR said that the next three years of expected poor growth figures – 1.8 per cent compared to the OBR’s forecast 2.6 per cent – mean Mr Osborne will miss his 2015 target for reducing the budget deficit.
It will be at least £25 billion higher than the OBR forecast, with public sector net borrowing at £54 billion rather than £29 billion.
