Brown backtracks over economic forecasts
Gordon Brown has today been forced to downgrade his economic growth predictions as he made his pre-Budget statement to the House of Commons.
The chancellor admitted that Britain’s economy was not increasing at the rate he predicted in March’s Budget – between three and 3.5 per cent – but in fact was growing at 1.75 per cent.
His admission was greeted with cheers from across the House, leaving Mr Brown unable to continue his speech for the noise, but when he could, he insisted Britain was in good shape.
The slowing growth was due to “the toughest and most challenging year for the economy”, the chancellor said, citing high oil prices and a slowdown in consumer spending.
But he insisted the economy was on course to meet its inflation target of two per cent, house prices were stabilising, employment was high and interest rates were also stable.
However, shadow chancellor George Osborne said Mr Brown had been “forced into the humiliation of admitting he got it wrong”, and was a chancellor “past his sell-by date”.
Far from coming to the Commons to give an accurate picture of the nation’s finances, he said, the chancellor had provided MPs with “tractor production figures from the old Soviet Union”.
He added: “I don’t remember him telling the electorate [in May] that the economy was facing a tough and challenging year – what he told the electorate about the state of the economy was not true. and it is difficult to believe he didn’t know it at the time.”
Mr Brown predicted that the current budget deficit would fall from £19.9 billion last year, to £10.6 billion this year, before becoming a surplus of £13 billion in future years, and he said he would end the economic cycle with a surplus of more than £16 billion.
But Mr Osborne questioned his sums, saying that his calculations suggested that the government was planning to borrow £151 billion over the next five years.
As for the chancellor’s golden rule, under which a government should only borrow to fund capital spending over the economic cycle, the shadow chancellor questioned Mr Brown’s announcement earlier this year that the cycle began two years than previously thought.
“Now the fiscal rules were supposed to keep deficit and debt under control, and [he was supposed to] fix his spending to fit his golden rule, but [it seems] he has fixed the golden rule to fit his spending,” Mr Osborne declared.
Meanwhile, Liberal Democrat Treasury spokesman Vince Cable accused Mr Brown of having a “talent for producing rabbits out of hats” while disregarding long-term financial issues such as local taxation and pensions.
He welcomed many of these “rabbits”, such as increased financial help for pensioners, but asked why the chancellor had only mentioned Lord Turner’s commission on pensions once in his statement.
“Why cannot he stand up in parliament and say I am proud of my record in fighting poverty, in economic stability. but also not say I have made mistakes, we’ve exaggerated projections. – stand up and acknowledge his own failures,” Mr Cable said.