Banking News Recession Warning Following Emergency Budget

Written by Editorial Team

22 July 2010 / by Lois Avery

Recession fears have been heightened following a new report on the Emergency Budget from the Treasury.

The Commons Treasury committee has said that Chancellor George Osborne’s recent tough budget measures have raised the risk of Britain sliding back into recession.

The package, which included tax increases, pension reform, banking reform and spending cuts was designed to speed up the UK’s economic recovery.

The Treasury’s independent forecaster, the Office for Budget Responsibility, reduced its outlook for economic growth following the Budget, predicting the economy will expand by 1.2 per cent this year and 2.3 per cent in 2011.

Before the Budget, the OBR had forecast growth of 1.3 per cent and 2.6 per cent. The report, released today, says that the budget had: “raised the near-term risk of a period of negative growth”.

It went on to say: “There is concern that such a consolidation may come too early and cut too deeply, and as such cause the economic recovery to falter, leading to a ‘double dip’ recession.

“Whether or not this is the case, the global economic situation is fluid and fragile, and it is possible that the Chancellor may need to alter his current plans to compensate for external events.”

But it also recognised that there was an “increased likelihood of positive growth in the outer years.” And ended by saying “We welcome this as a signal that if economic conditions demand it he (George Osborne) may be prepared to take measures to stimulate the economy, even if these delay the current plans for cutting the deficit.”

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