Thursday, March 26, 2009

Oh Dear

Oh Dear
Hamish McRae on the fiscal hangover to come
. ..............the fiscal position is worse than I could have believed possible. In his pre-Budget report (PBR), Chancellor Alistair Darling shocked everyone by doubling the forecast for the borrowing requirement this fiscal year to £78bn. With one month to go we have already reached £75bn; the final figure could be around £90bn.
If that is dreadful, the fiscal year starting next month will be far, far worse. As you can see in the circles above, the PBR forecast was for £118bn, but the IMF comes in at £165bn, and the ITEM Club and Capital Economics higher still. The important thing is that a relatively small proportion of this will be the fiscal measures brought in to boost the economy and support the banks. Put it high and say that the additional measures will account for £30bn to £40bn of the deficit and you can see how dreadful the underlying position is.

..........Unfortunately, however, a return to growth will not correct the UK fiscal deficit. The prospect will be for higher taxation and sharp cuts in public spending for at least the next five years.

As I have been saying Brown`s claim to have a Policy of fiscal stimulus is like claiming you have a Policy of hurtling through ther windscreen having had a high speed car crash. It does not exist

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