Tax and spending plans in the Emergency Budget will reduce the economic growth rate by 0.4 per cent in 2011, according to the National Institute of Economic and Social Research (NIESR).
The institute predicts that public sector spending cuts are likely to undermine economic growth in every year from 2011 to 2015. From next year, the contribution of consumer spending will be less than in the decade before the recession and consumer spending for each individual in the UK will not recover its pre-recession peak until after 2015, it says.
“Given the current plans and outlook for the economy it is more likely than not that the Chancellor’s Fiscal Mandate will be met. But considerable risks to the outlook remain and the Chancellor will need to keep a watchful eye on the public finances,” says the NIESR.
Output in 2011 is likely to decline and this year’s growth is projected to dwindle to 1.3% as the rate of capital spending slows.
