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New fiscal watchdog downgrades growth forecasts
The new Office for Budget Responsibility (OBR) has cut the previous Labour Government’s economic growth forecasts after it found that they were ‘too optimistic’.
In its inaugural statement, the fiscal watchdog downgraded the UK’s 2011 growth estimates to 2.6%. The former Chancellor Alistair Darling had predicted that the economy would grow by 3.25% next year.
The OBR’s estimates will form the basis for the Chancellor George Osborne’s emergency Budget on 22 June and could pave the way for substantial spending cuts and tax rises.
Last week Prime Minister David Cameron said that the OBR’s figures would ‘show the scale of the problem we are in today’ and warned that ‘painful’ spending cuts would affect everyone over the coming years.
The OBR, which was set up shortly after the coalition Government came to power, will make an independent assessment of the public finances and the economy for each Budget and Pre-Budget Report.
George Osborne said its creation would ‘remove the temptation to fiddle the forecasts’, adding that it would create ‘a rod for my back down the line and for future Chancellors’.
Chaired by former Treasury official Sir Alan Budd, the OBR will present an updated forecast alongside next week’s Budget, which will take into account the policies announced.