But my estimates do not represent some barely imaginable extreme. The out-turn could easily be still worse, particularly since these numbers do not The answer has to be no. The government is caught between the devil and the deep blue sea. Its instincts are Keynesian, that is to But in the event, the poor state of He has been stymied by both the concern not to make the recession worse by drawing demand out of the economy now, and by his reluctance, for But these are pie in the sky numbers. If you believe the pollsters, it won't be a Labour Chancellor who has to push through The Treasury coyly omits to tell us when the ratio of debt to GDP will be back below the 40pc marker laid down in Gordon Brown's Did the budget help? No. One problem is that the Treasury numbers simply have no credibility whatsoever. In last year's budget he told us that it would be £43bn. He now says that it will be £175bn. Why on earth should we believe him? He talked of developing offshore wind. If you ask me there seemed to be an already excessive supply of onshore wind. We seem more likely to be leaders in red technology, with the Debt Management Office issuing umpteen squillion of gilts in the Talk of recycling. In the circumstances this was appropriate, for it seems that the grandchildren will still have to live with the consequences of what had to be endured by their grandparents.
next year and only a moderate recovery when it comes.
The Treasury forecasts that next year consumers' expenditure will rise by 0.25pc, despite what will probably be high and rising unemployment and average earnings growth at minimal levels.
Meanwhile, the savings rate will still be at very low levels and I suspect that people will want to rebuild their financial strength before starting to increase their spending again.
So I am pencilling in peak borrowing of about £230bn, or 16pc of GDP, next year, compared with £173bn forecast by the Chancellor. Of
course, Mr Darling could be right. Indeed, the borrowing numbers could turn out to be lower than he is forecasting.
include allowance for any major losses from the government's involvement in the banking sector.
Has the budget done anything to make the economic recovery come sooner?
say, it would like to do more to boost aggregate demand by cutting taxes and/or increasing spending.
the public finances has restricted it to a further stimulus of only 0.5pc of GDP, a pathetic figure in view of the seriousness of the recession.
But neither has the Chancellor done a great deal in the direction of restoring orthodox finances by reducing the borrowing requirement.
political reasons, to announce either large tax rises or big cuts in spending.
The Treasury has cut the planned real growth of current public spending in later years to 0.7pc per annum, reduced from 1.1pc
previously.
these spending "cuts".
Even after these supposedly draconic reductions, the debt to GDP ratio doesn't stop rising for four years and peaks only just below
80pc.
fiscal rules. (Remember them?) On my numbers, I reckon that it could be thirty or forty years hence.
In these circumstances, the squeeze on public spending doesn't go anywhere near far enough. If it were up to me, I would base the fiscal plans on a complete freeze on public spending in nominal terms, implying cuts in real terms, to take effect over a multiyear period.
Given that there is so little that the government can currently do to boost the economy directly, the real contribution that it can make now is by boosting confidence.
As recently as last November, the Chancellor told us that the borrowing figure for this year would be £118bn.
Mr Darling still managed to retain something of his predecessor's tendency to see the UK as leading the world in a variety of fields,
including green technology.
morning and then the Bank of England buying them in for rather more in the afternoon.
The Chancellor talked warmly of grandparents caring for their grandchildren.
---------------------------------------------------------
Roger Bootle is managing director of Capital Economics and economic
adviser to Deloitte.
Thursday, 23 April 2009
If the Budget was a numbers game, the Chancellor definitely lost
As expected, the budget was really a holding operation. The startling
thing is that, gargantuan though the forecast borrowing numbers are,
they are still likely to prove too low.
By Roger Bootle
In particular, it was striking that the Treasury is forecasting a recovery in the economy next year of 1.25pc, and a supercharged recovery, running at 3.5pc per annum, thereafter. I suspect that the out-turn will be far worse than that, with a further decline in GDP
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