Brown’s economic legacy on a ‘fragile high’
Gordon Brown is leaving his ten-year tenure as chancellor “on a high” but risks leaving behind a legacy of debt, an influential economic forecast has concluded.
Describing Mr Brown as the “champion of borrowing”, Ernst and Young’s ITEM club’s spring forecast reports that the government has taken the lead in making individuals and firms “overly relaxed about risk”.
Government spending is again set to be above Treasury forecasts, the ITEM club claims. Overall public sector net borrowing is expected to be £34 billion in 2007-08, up from original projections of £31 billion.
This has been matched by a willingness to borrow among individuals. Despite rising tax and utility bills, homeowners are “spending as if it was going out of fashion,” the ITEM club concludes, with a benign macroeconomic environment making people overly relaxed about risk.
Professor Peter Spencer, the chief economic advisor to the ITEM club, remarked: “Many people are following the Chancellor’s lead and are borrowing to finance consumption. The UK’s current deficit has reached 3.5 per cent of GDP which suggests that as a country we are close to the edge.
“Ultimately, we are all skating – not to say wobbling – on thin ice. There’s a danger that we are slithering into complacency.”
However, the Treasury replied that new debt is lower in the UK than the European average and is the second lowest in the G7.
“The UK’s macroeconomic performance, in the words of the IMF, ‘remains impressive’ with the UK economy having now grown for a record 58 consecutive quarters,” a Treasury spokesman continued.
“Household finances also remain strong, having benefited from robust growth, rising employment and low and stable interest rates,” he added.
Meanwhile, the Department for Work (DWP) and Pensions has been forced to admit an extra 100,000 adults were living in absolute and relative poverty in 2005-06.
After revising statistics released in March, the DWP admits 7.2 million Britons of working age were living in relative poverty and five million in absolute poverty.
The Conservatives’ described the admission as a “further blow” for Gordon Brown’s record on social justice, showing increasing poverty levels.
“This latest set back will do nothing to ease the concerns of the British public as we head towards a Gordon Brown coronation as prime minster,” claimed shadow work and pensions secretary Phillip Hammond.