Govt attacked amid economic gloom
A report suggesting slowing growth in Britain’s economy has prompted criticism of the government’s finances from opposition parties.
The National Institute of Economic and Social Research (NIESR) suggests gross domestic product (GDP) growth is expected to fall to 2.2 per cent in 2008.
Research published today predicts inflation will increase to 2.6 per cent, half a point above the rate seen in the final months of 2007, while it warns falling savings levels are likely to push up the budget deficit.
Alistair Darling’s first Budget on March 12th will not be able to run a fiscal surplus in order to raise saving levels, NIESR argues.
“If people do not want to save for themselves, they will not rush, on election day, to thank a government which saves for them,” it points out.
As a result Liberal Democrat Treasury spokesman Vince Cable believes the government faces a “sticky situation”.
“The prime minister now finds himself in the unpalatable position of having to either raise taxes or abandon the fiscal rules on which he built his reputation,” he said.
“With the cost of credit seriously affecting people’s spending power, a lower level of growth in the UK economy is now inevitable.”
Shadow chief secretary to the Treasury Philip Hammond said the report backed the findings of a report from the Institute for Fiscal Studies published earlier this week, which showed £8 billion of additional tax hikes were needed to meet the needs of public finances.
“This report adds to the evidence of Gordon Brown’s economic incompetence,” he said.
“Hard-working families, already hit by rising inflation and falling take-home pay, will be faced with tax rises of £360 each to plug the gap.”
