THE UK economy will grow by 2.1 per cent next year, the Office for Budget Responsibility (OBR) said yesterday, a cut from its original prediction of 2.3 per cent but still exceeding other forecasters.
The OBR also revised down its estimates for 2011 and 2012 by 0.2 per cent. However, the OBR now expects faster growth this year – forecasting that it will hit 1.8 per cent in 2010, up from the 1.2 per cent estimate in June’s emergency budget.
Yet Simon Kirby of The National Institute Economic Review said the projections were “still too strong given the weak prospects for Europe.”
Asked if talk of a double dip was over, OBR chairman Robert Chote said he expected a “steady albeit slow recovery over the medium term.”
The anticipated level of government sector job losses has plummeted, meanwhile. Aiming more cuts at welfare reform, the government has saved 130,000 state jobs.
Employment is expected to rise by over 2m in the term of the parliament. “Private sector job creation more than offsets falling public sector employment,” the report says.
Despite the economy expanding beyond expectations, the OBR showed caution by only slightly edging down the expected deficit for 2010-11 to £148.5bn (from £149bn).
The government is on course to achieve its fiscal targets, with the independent spending watchdog calculating “a roughly 70 per cent probability” that the deficit will become a surplus by 2015-16. Yet it warned that interest payments on government debt “have risen since August” and could increase further. The national debt will still “peak at around 70 per cent of GDP” in 2013-14, said Chote.
“We really need to get real about the true state of the public finances,” warned Eamonn Butler of the Adam Smith Institute. “The total national debt is crippling.”
The OBR’s central projection shows the national debt being paid off around 2050.