By Maximilian Clarke
A further drop in public sector borrowing in the face of an increasingly challenging economic situation suggests the Coalition Government’s deficit reduction programme is on the right course, the British Chambers of Commerce has said.
The organisation did, however, suggest that within the overall strategy- which has seen three consecutive months of lowered public sector borrowing and last month saw UK 10-year bond yields drop below German bonds- a greater focus should be placed on supporting business, allowing for jobs growth at a time of rising unemployment.
“These figures show that the UK’s overall fiscal position in the first eight months of the current financial year was better than many were expecting. In the face of weak growth, the deficit so far this year is more than £10bn lower than at the same time last year,” explains David Kern, Chief Economist at the British Chambers of Commerce. “There is every chance that the outcome for the full financial year will be lower than the OBR predicted in its recent forecast.
“Given the difficult economic situation, both in the UK and internationally, we believe the Chancellor’s fiscal strategy is still broadly on course, and the government should continue to reduce the structural deficit. Given the problems in the eurozone, and the recent increase in UK unemployment, it is important to reallocate priorities within the overall fiscal plan. This will help businesses create jobs, export and invest.
“While we expect the MPC to increase its QE programme early in the New Year, we urge the government to introduce significant policies to support growth. This would include a more aggressive reduction in red tape and the earliest possible introduction of credit-easing measures to improve the flow of lending to viable businesses.”
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