OBR says UK economy unlikely to meet 2011 growth target
Thursday, 04 August 2011 11:41
The man at the helm of the Office for Budgetary Responsibility (OBR), Robert Chote has admitted in an interview with The Independent newspaper that the UK is unlikely to meet its target of 1.7 per cent growth this year.
The OBR is the UK’s independent budgetary watchdog charged with examining and reporting on the sustainability of the public finances. Mr Chote said in the interview that current growth levels for the rest of 2011 could be “relatively weak,” raising doubts that the government will meet its tough targets for cutting the public sector deficit.
Earlier this week the National Institute of Economic and Social Research (NIESR) downgraded its estimate of growth for the UK economy for 2011 from 1.4 per cent to 1.3 per cent. Last week, the CBI slashed its growth estimates for the UK economy from 1.7 per cent down to 1.3 per cent. Both bodies pointed to a lack of consumer demand caused by high inflation, low wage growth and job insecurities.
The revised forecasts have increased the pressure on the Chancellor, George Osborne to consider radical measures to boost the economy such as cutting VAT, although most economic organisations support him in his attempts to cut the deficit as a priority.
Mr Chote explained the revision in growth forecasts, saying that one-off factors in the second quarter lowered growth figures from that which most people had expected.
He said: “As a simple matter of arithmetic, in order to get to 1.7 per cent now you’d be looking for quarter-on-quarter growth rates of 1 per cent in the second and third quarters of 2011, and there aren’t many people out there expecting that.”
Meanwhile, the Labour Party shadow Treasury minister, David Hanson said that Mr Osborne should cut taxes and reduce the spending cuts so as not to completely derail the economic recovery.
He said: “We need a more balanced deficit plan that puts jobs and growth first, alongside tough decisions on tax and spending cuts.
“As the IMF and the National Institute have warned this week, continued slow growth should lead to a change of course, such as the temporary VAT cut Labour has been calling for to kick-start the stalled recovery.”
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