UK Budget 2011 Preview

Sticking to the squeeze

Roger Bootle, economic adviser to Deloitte, gives his Budget 2011 predictions:

• The Budget on March 23rd will probably include some minor measures to ease concerns over the economy and sky-high oil prices. But the Coalition Government is not likely to signal any significant scaling back of its planned spending cuts. The big squeeze is still coming.
  
• The economic background to the Budget is a little weaker than was anticipated by the Office for Budget Responsibility (OBR) in its last forecasts back in November. The drop in GDP in Q4 left growth in 2010 overall of 1.3%, compared to the OBR's forecast of 1.8%.
  
• But I doubt that the OBR will reduce its economic forecasts for this year and future years markedly. Indeed, with inflation running well above expectations, nominal GDP growth could be rather stronger than previously anticipated in the near-term, with potentially positive fiscal effects.