Government borrowing 'set to soar to £111bn
Government borrowing could hit £111 billion according to research
Saturday, 15, Nov 2008 12:01
Total government borrowing may reach £111 billion in 2009, posing "serious risks" to the UK, according to a report from the British Chambers of Commerce (BCC).
Borrowing could total 7.6 per cent of GDP, significantly higher than the EU's limit of three per cent.
The BCC also predicts five consecutive quarters of negative GDP growth, with unemployment hitting nearly three million by mid-2010.
The pound could also "plummet to dangerous new lows" the BCC said, if the market interprets the government's fiscal strategy as reckless.
BCC director general David Frost said: "Monetary policy alone is not enough to help businesses and consumers under unprecedented financial pressure. An effective fiscal package, with tax cuts for businesses at its very core is paramount."
Shadow chief secretary to the Treasury, Philip Hammond, said: "This report shows that business people clearly understand the risk that more reckless borrowing could cause a collapse in the value of sterling, undermine the scope for interest rate reductions, and do more harm than good to the British economy."
The BCC is calling for business tax cuts with reductions in national insurance to avoid sharp unemployment rises.
In addition, the government may have to play a direct role in lending to business if credit markets remain paralysed.