Economy: Experts worried by optimism

Wednesday, 12, Mar 2008 12:00

The long-term assumptions underpinning Alistair Darling's first Budget are a little too optimistic, economists say.

Mr Darling predicts world economic growth will only slow down to four per cent and predicts UK growth will accelerate to up to three per cent by 2010.

Most, including Global Insight analyst Howard Archer, say these predictions are "too high".

With public spending stretched to its limits – government borrowing will reach 39.8 per cent, just below the golden rule limit of 40 per cent - the Confederation of British Industry's Richard Lambert warned the figures leave "little room for manoeuvre should things take a turn for the worse".

The Centre for Economic and Business Research (Cebr) suggests such a scenario would force "a series of tight Budgets".

It predicts the markets "will not be enthused" because of its positive arithmetic, predicting bad news for the pound, gilt and equity markets.

Underlying the high risk is the current limited scope for public spending, economists say. As a result they note the constrained nature of the 'boring' Budget.

Mr Archer said it "raises few eyebrows" while Mr Lambert commented: "The chancellor didn't set the Thames alight, but then he didn't have anything to set it alight with."