Following last weeks news that the UK had fallen back into recession, the Chancellor, George Osborne said: “The one thing that would make the situation even worse would be to abandon our credible plan and deliberately add more borrowing and even more debt.”
However, it looks as though, despite previously backing the Chancellor’s austerity plans, the OECD’s opinion differs, with the think-tank saying that George Osborne could let the debt-reduction target slip a year without suffering a backlash in band markets.
The acting head of the OECD’s UK desk, Christophe Andre has said that the UK government could respond to the double dip by “letting the automatic stabilisers play and doing a little more infrastructure investment – partly financed by other measures such as changes to VAT and a bit more borrowing.”
Mr Andre also said: “I don’t think the markets would react adversely if the deficit kept on track on a cyclically-adjusted basis but debt came down a year later than planned” adding that he was talking about something small, up to about half a percent of GDP, which would equate to about £7.5 billion more borrowing.
The latest comments from the OECD is not the first time that the think-tank has suggested the Chancellor loosen the purse-strings; with similar calls coming in May last year.
For more information, please contact Glazers, Chartered Accountants London or visit www.glazers.co.uk
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( 2.8 / 129 )A leading Tory MP, John Redwood, has called for the Chancellor, George Osborne, to slash taxes to help drag Britain out of recession.
The former Cabinet minister has called for “Gordon Brown” levels of income and capital gains tax to similar levels; following the release of data earlier this week which suggested that the UK was in its first double-dip recession since the 1970s.
Despite the Chancellor cutting the top rate of income tax from fifty-pence during the recent budget, along with introducing faster reductions in corporation tax, Mr Redwood has claimed that George Osborne “should go back to Gordon Brown’s tax rates” adding “he got the tax rates right that we need for an enterprise economy.
“He should cut the top rate of income tax back to 40p and capital gains tax to 20p, to go alongside his corporation tax reforms.”
Former cabinet minister, Mr Redwood also added that lowering taxes would enable the Treasury to collect more revenues because Britain was more competitive; whilst the Labour party have also called on the Chancellor to come up with an economic “plan B”, with Ed Miliband claiming the austerity plan to “cut as far and fast as you can” had failed and urged Britain to take a lead from Barack Obama’s America.
For more information, please contact Glazers, Chartered Accountants London or visit www.glazers.co.uk
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( 3 / 124 )According to the most recent CBI survey, manufacturing output showed modest growth in the first three months of the year, amid a general feeling of optimism, which is somewhat at odds with data from the Office for National Statistics (ONS) which indicated yesterday that the UK was back in recession.
Ian McCafferty, the CBI’s chief economic adviser, said that optimism was at its highest for two years, although remaining fragile, saying: "Given Europe is still our biggest export market, the outlook for UK manufacturing will remain uncertain until the eurozone crisis is resolved."
And he expressed surprise at the figures from the ONS, which showed a 0.1 per cent contraction in manufacturing output, saying that the CBI survey had pointed to a 0.1 per cent rise.
Other economists were equally surprised at the ONS data. The Bank of England found the figures “perplexing” and Andrew Goodwin, senior economic advisor to the Ernst & Young ITEM Club said: “Our reaction is one of disbelief.”
ONS chief economist Joe Grice defended the data, saying at a news conference yesterday: "We have no reason to suspect that these figures are any less reliable than would usually be the case."
"We have a very large set of respondents to base our results on - 40,000 for the economy as a whole," he said. "We go through our returns carefully, we go back to respondents and if anything looks odd, we question it, sometimes several times."
However, economists point to a 0.6 per cent discrepancy in their fgures in 2009, with Chris Williamson of Markit saying: "As was the case three years ago, there is a worry that by heralding a double-dip recession, misleading, gloomy official data shatter the revival of consumer and business confidence.”
For more information, please contact Glazers, Chartered Accountants London or visit www.glazers.co.uk
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( 2.9 / 114 )Official figures released earlier today by the Office for National Statistics have shown that the UK has slipped back into recession – the country’s first double-dip recession since the 1970s.
The latest figures have shown that during the first quarter of 2012, the economy shrank by 0.2 percent, which follows on from the contraction of 0.3 percent during the final quarter of 2011 – which officially is defined as a double-dip recession.
Many economists had expected the UK economy to avoid a double-dip recession, however a three percent fall in construction output – the biggest fall in three years – coupled with slow service sector growth; has caused the economy to struggle.
The Office for Natiaon Statistic's preliminary estimates of GDP are the first released within the European Union, and are based partly on estimated data. On average, they are revised by 0.1 percentage points up or down by the time a second revision is published two months later
However, in further bad news for the Treasury, the Bank of England, have warned that there is a risk of another contraction during the second quarter of 2012, due to an extra public holiday; and unlike the previous two quarters, the Bank of England do not appear keen to provide further monetary stimulus through quantitative easing asset purchases.
For more information, please contact Glazers, Chartered Accountants London or visit www.glazers.co.uk
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( 3.1 / 106 )Official figures show that although the government, despite borrowing more than expected last month, have still managed to hit their borrowing target over the year.
The Office for National Statistics have revealed that during March, public sector net borrowing, excluding interventions such as bank bail-outs, came in at £18.2 billion. However, because previous months' borrowing had been revised down, the government still met its target of £126 billion for the year.
The borrowing from the government during the last year was down from £136.8 billion the previous year – which was significantly helped by downward revisions in the previous 11 months.
A Treasury spokesperson said: "Today's data shows that the forecast for 2011/12 is on track, with public borrowing down by £11 billion compared to the previous year.”
Economists believe the government will have a tougher task meeting forecasts to reduce borrowing to £120 billion during the current financial year; mainly as a result of the economy still struggling and unemployment rising; which is expected to hurt tax revenues and increase benefit payments.
Despite the forecast for the next twelve months being gloomy, the government is aiming to eliminate the deficit by 2016 / 2017; with the Treasury spokesperson adding: "This shows that the government's plan to reduce the budget deficit is working."
For more information, please contact Glazers, Chartered Accountants London or visit www.glazers.co.uk
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