The fact that the UK has seen six successive quarters of negative growth – meaning we are still in recession – is bad news for the prime minister. Not least because he claimed, only last month, that Britain was likely to return to growth by now. The implication was that his Pre-Budget Report would not quite so grim. Unfortunately he was wrong:
September 24, FT:
Gordon Brown appeared to override his chancellor yesterday as he suggested that Britain could return to growth in the third quarter of this year – months earlier than expected.
The prime minister broke the Treasury’s long-standing formula on the prospects for the economy, suggesting on BBC radio that “some economic growth” could be announced at the pre-Budget report (PBR).
This report is expected just after the publication of the third-quarter economic figures in late October. Alistair Darling, the chancellor, has been sticking to the Budget forecast that he hoped to see some growth by the end of the year.
Mr Brown’s comments came as Fitch, the credit ratings agency, indicated that Britain would put its top-notch credit rating under threat if Mr Darling did not announce further spending cuts or tax increases in the PBR.
Fitch said that since forecasts for growth in 2010 and beyond were improving, nations with triple A credit ratings should strengthen their plans to reduce budget deficits and provide greater detail on how those plans would be achieved.
While the prime minister hopes that any growth figures will show that his fiscal stimulus policies are working, the Fitch report indicated that any such announcement would come with a sting in the tail.
It said that “with growth forecasts for 2010 being revised upwards, and deflation fears easing, in Fitch’s opinion sovereigns should consider strengthening medium-term consolidation plans . . . and detail how this is to be achieved”.