Grant Thornton's chief economist responds to the chancellor's
budget statement
The 2010 Budget raised the curtain for the election campaign,
outlining better than expected tax receipts and lower borrowing
forecasts. But slow economic growth remains and there is some
strong and bitter medicine for the public sector on the way says
leading business and financial advisers Grant Thornton.
Curtain raiser for election
"This pre-election Budget was more like a history lesson in how the
Government saved the UK economy from the financial crisis, rather
than a concrete plan to reduce the Budget deficit" says Stephen
Gifford, Chief Economist at Grant Thornton.
The state of public borrowing
"With higher tax receipts from the emerging recovery, lower than
forecast unemployment and consumer spending holding up well, the
Budget was better than expected, but only slightly. The level of
borrowing is now forecast to be £167 billion next year, instead of
the £178 billion forecast in the 2009 PBR.
"The reduction in borrowing provides some welcome relief from all
the turmoil of the past two years", says Gifford. "But the
Chancellor should not over play his hand. The economy and the
public finances remain in a perilous state with slow growth of
1-1.5% still expected for 2010, net debt not peaking until 2014/15
at 75% and the real risk of a double-dip recession still in
play."
"Some of the better than expected tax revenues may have come from
pay rises and bonuses being brought forward for high earners to
avoid the introduction of the 50p rate in April 2010. We will have
to wait and see whether tax receipts continue to
flourish".
A challenge to the public sector
"Against the backdrop of high borrowing and rising net debt, the
Chancellor yet again outlined the plans to halve the deficit over
the next four years. Around £20 billion of savings were
outlined with £11 billion in savings from efficiency programmes, £5
billion of cuts in projects and £4 billion from public sector pay
restraint."
"This Budget lacked detail on timings; which governments
departments will feel the pinch the most, and where the cuts would
fall first. We will have to wait until after the election for that.
In the meantime, let's hope the ratings agencies for government
debt are not too disappointed".
For more information please contact:
Suvra Datta, press office for Grant Thornton UK LLP, on 0207 728
2375 or
Stephen Gifford, Grant Thornton Chief Economist, on 07814 421
899