Prime Minister David Cameron’s government runs the risk of pushing the economy into another recession in the biggest budget squeeze for 50 years, former U.K. Treasury adviser Roger Bootle said.
“The gamble of this budget is, what’s going to happen if the economy does not deliver and it’s generally thought that this budget has pushed the economy over the edge?” Bootle, the founder of London-based research company Capital Economics Ltd., said on Bloomberg Television’s “The Pulse” today. “Slower growth people will just about accept. The real danger is that we go back into recession.”
Chancellor of the Exchequer George Osborne yesterday raised sales tax, froze public workers’ pay, and said government agencies apart from the National Health Service face a 25 percent spending cut over four years to tame the deficit. U.K. economic growth slowed to 0.3 percent in the first quarter from 0.4 percent in the final three months of 2009.
Bootle said the U.K. runs the risk of another slump as public-spending cuts in other countries threaten to curb demand for British goods abroad. The Bank of England is counting on the pound’s weakness to stoke exports and support the recovery.
Countries are “competing to say ‘My austerity package is bigger than yours,’” Bootle said. “The result of all this is that every country’s export market is being squeezed.”