UK growth figures to be revised downwards again

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by a Newsnet reporter

In an interview yesterday with the Independent newspaper, Robert Chote, chair of the Office of Budget Responsibility, has admitted that Chancellor George Osborne’s target of a growth of 1.7% in the economy is likely to be missed.  The Office for Budget Responsibility was created by the Coalition government to act as the government’s fiscal watchdog.

Mr Chote warned that growth this year was likely to be “relatively weak” and said that the Chancellor will almost certainly be forced to downgrade predicted growth when he makes his Autumn Budget Statement to the House of Commons.  This will be the fourth time since the last Labour budget in 2010 that the government has been forced to revise growth forecasts downwards.

Mr Chote’s remarks are likely to increase calls on Chancellor George Osborne to protect Britain’s fragile economic recovery by toning down austerity measures and cuts in spending.  The cuts are aimed at eliminating a budget deficit of almost 10 percent of GDP over the next four years.

That goal was based on the assumption that Britain’s economy would expand by 1.7 percent this year, which Mr Chote said was now unlikely to be achieved after weak growth in the first half of this year.  In his interview with the Independent 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.”

A spokesman for the Treasury said: “The economy is growing and creating jobs. The service sector has been showing continual growth and July’s figures showed its strongest level for four months.

“The difficult decisions the Government has taken to reduce the deficit is essential for sustainable growth.”

Commenting on Mr Chote’s remarks, SNP Treasury Spokesperson, Stewart Hosie MP, said: “These comments further underline the need for an urgent change of direction by the Treasury.  George Osborne needs to come up with a Plan B or at the very least more flexible measures to boost growth fast.

“The SNP Scottish Government has already proposed a three-pronged growth strategy to UK Ministers.  First, measures are needed to boost consumer confidence, especially critical to recovery at a time of inflation, fuel and food price pressures.  We need to see a new focus on additional infrastructure investment, such as new transport and housing projects, to create new jobs and new capital assets for the long-term.  And we also need the UK government to take action to ensure the banks improve access to finance to help good businesses grow.

“The SNP is building recovery in Scotland, with a growth strategy prioritising capital investment that has contributed to eight consecutive reported months of falls in unemployment, we are protecting household budgets though the council tax freeze, and helping bolster consumer confidence with no compulsory redundancies for staff in government, our agencies and the health service.  With greater access to the key levers of economic growth, such as corporation tax and borrowing powers, the Scottish Government could do much more to enhance investment and jobs across the Scottish economy.”