Brown under fire over GDP growth
Gordon Brown’s record as chancellor has come under fire once again following new figures showing the UK economy grew at its slowest rate for 12 years in the second quarter.
GDP growth slowed to 1.7 per cent year-on-year between April and June, the preliminary estimate from the Office of National Statistics (ONS) shows, the lowest since the first quarter of 1993.
As well as slowing GDP growth, it was announced today that manufacturing output fell 0.7 per cent this quarter.
The news follows figures published earlier this week showing public sector net borrowing hit £5.9 billion in June – up £1.5 billion on this time last year and the highest for the month since 1993.
Critics of the chancellor have seized upon the figures, and the news this week that the Treasury has extended the economic cycle on which Mr Brown’s ‘golden rule’ was based, as evidence that he is losing control of the economy.
“Gordon Brown began the week by announcing that he was moving the goalposts to make sure he met his own fiscal rules. He ends it with news that economic growth has failed to pick up while manufacturing output continues to go backwards,” said shadow chancellor George Osborne.
“We need a fresh approach to the economic challenges that we now face. Gordon Brown’s out-of-date answers are taking us in exactly the wrong direction.”
Global Insight economist Howard Archer said today’s figures suggest Mr Brown would have considerable difficulty meeting his ‘golden rule’, which only allows borrowing in order to invest over the economic cycle, had he not extended the cycle by two years.
Citing a floundering manufacturing sector, weakened exports and business investment, he predicted that growth will hit just 1.8 per cent this year, considerably less than the chancellor’s 3-3.5 per cent prediction.
“Despite the surprisingly strong growth in retail sales in June, we remain dubious that consumer spending is going to see sustained marked improvement in the near term at least, given that a weakening labour market is now threatening to add to add to the already significant pressures facing the consumer,” he said.
“In addition, concerns persist about the strength of investment and exports going forward, given a likely weakening in profitability over the coming months, a high degree of uncertainty about the future and persistently soft domestic demand in the eurozone.”
Mr Archer added: “Consequently, we forecast GDP growth to be limited to 1.8 per cent this year. This highlights the problems that the chancellor would have had in achieving his ‘golden rule’, had he not moved the goalposts earlier this week.”
