New Budget office downgrades forecasts
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The newly created Office for Budget Responsibility has downgraded growth forecasts for next year from 3.25% to 2.6%.
But the OBR report, released today, is also projecting a steady drop in unemployment with 200,000 more jobs next year and almost 1m by 2014.
Business investment is expected to leap to 8% in 2011 after a 2009 low of minus 19.3% and the claimant count is expected to drop from 1.5m this year to just 1.1m in 2014.
Formed in May the three man committee has spent the last month assessing economic performance ahead of the emergency budget on June 22.
Capital Economics’ chief European economist Jonathan Loynes claims that cumulative borrowing will be £22b less than expected according to the report.
Loynes says: “The new forecasts published by the Office for Budget Responsibility have taken a surprisingly optimistic view of the outlook for the UK public finances. Contrary to expectations that it would project a much higher path for public borrowing than the previous Government predicted.”
He added that the government may still need to cut borrowing sharply and that a he is expecting a tough Budget next week.
The OBR will make independent assessments of the public finances and the economy.
It has direct control over the forecast and have full access to the necessary Treasury data and analysis.
It will also present a range of outcomes around its forecasts to demonstrate the degree of uncertainty.
In each Budget and Pre-budget report the OBR will confirm whether the government has a better than 50 per cent chance of achieving the forward looking fiscal mandate set by the Chancellor.
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