New research released this week showed that the Chancellor, George Osborne, faces a £20bn black hole in public finances, whilst another suggested the economy will grow this year. Jermaine Haughton weighs up the respective research reports ahead of Budget week
The total size of the economy is to exceed the level it was at before the recession.
Well, that is the view of the British Chambers of Commerce (BCC) anyway, which predicts it will be bigger than in the 2008 peak by the second quarter of this year. Ahead of Chancellor George Osborne’s Budget announcement next Wednesday, the BCC has increased its economic growth estimate to 2.8% this year – up from its previous forecast of 2.7%. All good news for George, right?
Sort of. With the economy seemingly roaring back, many voters, particularly in lower-income households, will be watching closely to see the impact on public coffers.
New research by the Financial Times showing that Osborne is facing a £20bn black hole in the public finances, will have been less welcome at Number 11. Those findings mean that austerity may have to continue until 2020 – a year longer than expected. You can already sense Ed Balls getting hot under the collar and, of course, red of face at that news.
The report concludes that the Government will be unable to rely on economic recovery to eliminate the deficit. Osborne is already committed to imposing £25bn in spending reductions between 2016-17 and 2017-18, including £12bn in welfare cuts. Ouch.
To compound the Chancellor’s misery, think tank Fabian Society’s alternative indicators of Britain’s economic performance shows national debt is expected to reach 80% of GDP in 2015-16, with high youth unemployment still a major problem.
The separate reports only add to the fiscal confusion the UK faces, and seem destined to underpin the Chancellor’s big speech next Wednesday – and the opposition’s inevitable response.
Jermaine Haughton is a journalist and digital media professional.