By Maximilian Clarke
The UK’s deficit reduction plan is making good progress and the monthly borrowing rate is dropping, the British Chambers of Commerce have said, despite figures which this morning showed the government’s net debt had crept past the £1 trillion mark for the first time in history.
And although the rate of reduction is less than had initially been forecast, due to a prolonged recovery and muted tax take exacerbated by a continued strain on disposable incomes, the Chambers’ Chief Economist, David Kern, considers the UK’s finances to be better than expectations.
Speaking today, Kern said: “These figures were lower than expected, and show the UK’s fiscal position in the first nine months of the financial year was better than many were anticipating. In the face of weak economic growth, the deficit is more than £11bn lower than at the same time last year. Even if we assume some deterioration, the deficit for the financial year as a whole will likely be lower than the OBR predicted at the time of the Autumn Statement.
“Given the challenges facing the economy, both domestically and internationally, we believe the fiscal strategy is still on course, and the government should persevere with cutting the structural deficit. But with the ongoing debt crisis in Europe and increases in UK unemployment, priorities within the total fiscal envelope should be reallocated. This will help businesses create jobs, invest and export.
“The MPC should increase quantitative easing at its earliest opportunity, while the government must introduce more policies to support growth. This means the introduction of its promised credit-easing programme, an aggressive reduction in red tape, and action on the planned increase in business rates.”
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