Are Alistair Darlings economic forecasts seriously flawed?
In a move which is unprecedented in political and banking circles the deputy governor of the Bank of England, John Gieve, has criticised the Chancellor's prebudget report, released only two months ago, and the forecasts included within. He believes that the forecasts were overoptimistic (something which the opposition parties suggested on a number of occasions) and as such he was giving the UK public and UK business sector an incorrect impression. So what next?
As the UK government moves headlong towards a £1 trillion budget deficit it is highly likely that this situation will actually be worse than initially thought. The overoptimistic forecasts surround the receipt of tax income in the future and growth of the UK economy in general. If the economy grows slower than the forecasts published by the government then this will severely reduce tax income receipts and force the government to slash public service costs or take on more debt.
When you consider that Gordon Brown has literally placed public service spending at the forefront of his recovery plan, hoping to safeguard and create to 100,000 jobs, a change in strategy would be a serious U-turn. Slowly but surely the walls are starting to move in towards Gordon Brown and the pressure is starting to mount in number 10 and number 11 Downing Street.
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