You are here: Home - News -

Recession will blow fiscal framework to smithereens

by:
  • 15/02/2008
  • 0
A major downturn could leave a significant dent in Government finances and have a big impact on national accounts, according to a report from Capital Economics.

The fear is an economic downturn would cause a sudden fall in tax revenues from suffering consumers and businesses meaning the Government has to borrow more to meet its budget.

Capital Economics said borrowing rules would come under serious threat even if the economy slowed only as much as the Treasury has forecasted.

This could mean the budget deficit could more than triple to an unprecedented £150bn.

The report comes a week after the Treasury broke its sustainable investment rule for the first time after Northern Rock’s debts were included on the British national accounts.

The report said a major downturn in the coming months, with the economy shrinking by 1pc, could see public borrowing rise as high as £100bn or even £150bn per annum, blowing the “fiscal framework to smithereens” and perhaps even leading to some rise in the Government’s relative cost of borrowing.

Related Posts

Tags

There are 0 Comment(s)

You may also be interested in