The forecasting body has called today for the Chancellor to deliver a Budget on Wednesday that will stimulate economic growth, saying that any action taken later than this Budget will not make any input before the next election.
The Cebr has official projections of the budget deficit over the coming years are “overoptimistic” and said that the UK needs a domestic policy that is more supportive of economic growth
Cebr said, “Despite the likely good news of a budget deficit roughly £10 billion below plan for 2011/12, the deficit will only fall sluggishly if economic growth is below the Office for Budget Responsibility’s (OBR) projections – as we expect it to be.
“The OBR view that everything will come up smelling of roses in the medium term is unlikely to materialise given present policies. To come true it would require a sequence of favourable events.
"Good luck with the international economy and Middle East tensions abating sufficiently to bring down the price of oil; a viable re-entry from QE before so much money is printed that inflation becomes endemic; and a solution to the euro crisis that does not cause an implosion of the regional economy. “
Cebr has said there are three key areas where growth can be promoted without jeopardising deficit reduction:
1) Deregulatory measures: the body says that “by far” the most important of these is the enactment of controversial planning law changes previewed in last year’s Budget
2) Changing the 50p tax rate: A Cebr study concluded that it would eventually lose money and says “the latest data seem to imply that this has happened even earlier than our deliberately cautious analysis suggested”
3) Fuel duty: Cebr said fuel tax has a very significant impact on business and consumer finances, and even a “modest reduction” in fuel duty could support economic growth and give an important psychological boost to financially squeezed households.
It has said that other pro-growth measures might be to facilitate pension fund investment in infrastructure and continuing the phased corporate tax reduction.
In today’s Budget call for action, it concludes, “There are substantial lags between the implementation of policies and their effects on the economy.
“Any action taken later than now will not affect growth before the next election. It is also the last budget before entering the pre-election phase where controversial pro-growth measures are ruled out by politics.”