A LEADING economist forecasting group has questioned Alistair Darling’s future plans for the UK public finances, saying his projections in the recent Budget lacked both precision and ambition.
The Ernst & Young Item Club praised Darling’s Budget for assisting businesses and supporting the labour market but said the Treasury had wrongly based its assumptions for UK economic recovery on a bounce back in consumer and domestic spending.
“We remain concerned that the Treasury’s forecast lacks precision. It is dependent upon a strong revival in domestic demand over the next two to three years, which appears unlikely in the current circumstances,” said Peter Spencer, chief economic adviser to the Ernst & Young ITEM Club.
The recovery will instead be export-led, with private sector companies taking advantage of the weak pound.
Growth remains unlikely to surpass one per cent in 2010, the Ernst & Young said.
But in 2011 gross domestic product will rise 2.7 per cent, up from an estimate in January of 2.5 per cent, said the researchers, who use the same model as the U.K. Treasury. The Item Club forecasters believe sterling’s 25 per cent decline since 2007 will spur export growth.