THE new allegedly independent fiscal watchdog has downgraded the economic growth projections for the UK economy, and also cut its debt projection as a percentage of GDP.
The Office for Budget Responsibility (OBR) says the shaky UK capitalist economy will expand by 2.6 per cent in 2011, down from the 3.25 per cent estimate given in Labour’s last Budget.
However, the OBR also says the deficit and debt will not be as bad as Labour had forecast.
It predicts that the UK’s public deficit will fall, down to 10.5 per cent of GDP in the 2010-11 financial year, from the 11.1 per cent estimated by Labour.
For overall government debt, the national debt – the sum of all borrowing – the OBR estimates this will decline to 62.2 per cent of GDP in 2010-11 from the previous estimate of 63.6 per cent.
The OBR, however, adds that the part of the deficit that is not automatically reduced by economic growth – will widen from Labour’s prediction of 7.3 per cent of GDP in 2010-11 to 8 per cent.
The coalition’s Chancellor Osborne is due to unveil an emergency ‘shock and awe’ budget next Tuesday, and is already warning about horrific cuts, in a move to intimidate and cow the country.
In a speech in London yesterday the Lib Dem Deputy Prime Minister Clegg said that savage cuts are the only ‘progressive’ option.
This line has already been denounced by leading economist, David Blanchflower, a former member of the Bank of England’s Monetary Policy Committee.
While on the committee he led the faction that fought to slash interest rates and encourage the printing of money to assist the economy to recover.
He told the BBC – and former Tory Chancellor Norman Lamont, who presided over Black Wednesday in 1992 when the UK was driven out of the ERM, and interest rates were driven sky high, costing tens of thousands their homes – that slashing public spending risks sending the UK economy into a ‘death spiral’.
Blanchflower’s fear is that a big cut in public spending will finish off the private sector.
Blanchflower said: ‘There is no evidence that the government is going to create private demand, this could push us back into double-dip recession.’
He insisted that the end result of the Tory-led coalition’s savage cuts could lead to a ‘death spiral’ for the British capitalist economy.