Ian McCafferty, chief economic adviser to the Confederation of British Industry (CBI), was underlining the stark challenges facing whichever party wins the next election, which the Westminster government is compelled to call by June next year. He said it was “a concern at this stage” that whoever forms the next government should quickly “announce creditable plans for putting the public finances back in a good position over the medium term”.
He added: “We will see concerns in financial markets about the quality of the UK’s sovereign debt, as there are pressures arising from [its] size.”
The CBI last week urged Gordon Brown’s government to outline a “clear and robust path back to fiscal health”. In a speech in Glasgow, CBI President Helen Alexander noted that Britain’s budget deficit was likely to rise to 12% of GDP by 2011, and that even the Treasury’s own figures – consistently more optimistic than those of many independent analysts – suggested a slow return to health over the following seven years.
Alexander said: “By 2018, total UK government debt will be at least 80% of GDP. The 40% limits of the golden rule seem to belong to a sepia-tinted past … If political expediency means decisions aren’t made soon, the future will be one with fewer choices, and even more painful [choices].
McCafferty, in Glasgow to take soundings from CBI Scotland members, told the Sunday Herald that the differences in the economic health of Scotland and the rest of the UK were less pronounced than in previous recessions, “the biggest difference being that the degree of public-sector employment has helped protect Scotland into the downturn”.
He added: “The prognosis concerning green shoots is the same in Scotland as elsewhere: that the economy is in the process of stabilisation; the sharp falls we have seen have slowed down; and we are starting to get better news from a number of different quarters, in domestic confidence and internationally from the US and China.
“We have also seen the end of the dramatic de-stocking which has been a key driver of these sharp GDP falls. That inventory reduction seems to be close to an end, and this has good implications for GDP growth.
“There are still some fundamental questions on pace and timing. It’s going to be a longish, slowish recovery”.
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