21 July 2010
Last month’s emergency Budget increased the probability of the UK economy plunging back into recession, according to a report published yesterday by MPs.
Ananalysis of the June Budget by the Treasury select committee noted that Chancellor George Osborne had ‘chosen a somewhat more radical path than his predecessor [Alistair Darling]’ to cutting the public deficit.
The MPs say: ‘It appears there has been a slight increase in the chance of near-term negative growth and an increased likelihood of positive growth in the outer years.’
But the committee also said Osborne was ready to amend his austerity plans if necessary. ‘The chancellor told us that he had built a degree of caution into the fiscal mandate by seeking to achieve it a year early.
‘We welcome this as a signal that if economic conditions demand it he may be prepared to take measures to stimulate the economy, even if these delay the current plans for cutting the deficit.’
The committee, headed by Tory MP Andrew Tyrie, also warned that fiscal measures introduced by the new government were unfair on the least well off.
‘There is much debate about whether the chancellor’s Budget measures are progressive. Whilst those on the lowest incomes bear less of the strain than those on the highest incomes, I am concerned that those at the bottom appear to pay proportionately more than those in the middle of the income distribution,’ said Tyrie.
The MPs also remarked that Osborne ‘has been explicit that his aim is not only to reduce debt, but to rebalance the economy away from the public and toward the private sector’.
The Treasury report came on the same day that the Office for National Statistics published its public finance data for June. Total government debt reached a record high, while the level of public sector borrowing for the month was far worse than expected. Osborne responded: ‘The public finances numbers yesterday remind us why we need to get on top of the budget deficit.’
