Prime Minister David Cameron said bringing Britain’s debt under control is proving “harder than anyone envisaged,” paving the way for the Office for Budget Responsibility to downgrade its forecasts next week.
“High levels of public and private debt are proving to be a drag on growth, which in turn makes it more difficult to deal with those debts,” Cameron told business leaders in London today.
Chancellor of the Exchequer George Osborne will present updated economic and fiscal forecasts to Parliament on Nov. 29. The OBR, which oversees forecasting for the Treasury, is likely to cut its growth forecasts and say the budget deficit will be higher than predicted at the time of the March budget.
“Fears about the immediate future are real,” Cameron told the Confederation of British Industry annual conference. “Paralysis in the euro zone is causing alarm in the markets and having a chilling effect on economies in many countries, including our own.”
Independent forecasts published by the Treasury last week showed the economy expanding by 1 percent this year and 1.2 percent in 2012, below the OBR’s predictions of 1.7 percent and 2.5 percent. The budget deficit was forecast to be 128 billion pounds in the fiscal year through March, 6 billion pounds more than predicted by the OBR.
Cameron has made his five-year plan to eliminate the bulk of a deficit equal to 9 percent of gross domestic product the centrepiece of his economic strategy, rebuffing criticism from the opposition Labour Party that the cuts are hobbling growth. The turmoil in the euro region underlined the need to stick to the program, he said.
“People who argue that traditional fiscal stimulus, extra spending funded by even more borrowing, is the right answer are not just wrong, they are dangerously wrong,” Cameron said.