CBI: slump will make Osborne miss debt goal
THE GOVERNMENT’S budget deficit will go up, not down as planned, this year because of the new recession, the Confederation of British Industry (CBI) warned yesterday.
Borrowing will rise to £128.2bn in 2012-13, the respected business group said, £8bn higher than the Office for Budget Responsibility (OBR) expects and £2.2bn above the £126bn borrowed in 2011-12.
Meanwhile Legal and General analysts warned that in the longer-term, economic growth may never reach the levels the government hopes for.
“The OBR’s forecasts for global growth of five per cent are unsustainable – in the years up to 2007, these rates caused the economy to overheat, leading to recession,” said James Carrick.
As a result, UK growth will reach 1.5 per cent in the next five years “in a best case scenario”, half of the OBR’s three per cent forecast and leaving the government with a five per cent budget deficit in 2016-17.
However, Carrick said there was no real alternative to the government’s deficit reduction, adding more government spending would risk creating a bond crisis. “The government is damned if it does and damned if it doesn’t,” Carrick concluded.