Budget 2013: Growth - Growing pains have had a crippling effect, and the outlook is also abysmal

 

George Osborne embarked on a mini world tour at the outset of his Budget speech. He took us via the United States, Japan, the eurozone and even tiny Cyprus before finally getting to the UK. The message was clear: this world economy is in turmoil and that is why Britain is in such a poor state.

The deterioration in the Office for Budget Responsibility's outlook since December is depressing. Three months ago the official forecaster expected the UK economy to grow by 1.2 per cent this year. Today it halved that forecast to 0.6 per cent. Growth for 2014 is expected to be 1.8 per cent, down from 2.1 per cent. The contrast with the OBR's expectations for the economy back in 2010 is even more depressing. Back then the forecaster expected the UK to be expanding at a rate of 3 per cent by now. The economy is today around 4.5 per cent smaller than the OBR anticipated three years ago. We are still 3 per cent below the peak in output achieved in the first quarter of 2008.

The OBR reiterated its view that weak exports, rather than the Coalition's austerity programmes, are the primary reason why the British economy has grown less than it expected back in 2010.

The OBR expects growth to return in 2015 with a 2.3 per cent expansion, rising to 2.7 per cent in 2016 and 2.8 per cent in 2017. It sees business investment picking up to an 8.6 per cent growth rate in 2015, at the same time as Government current spending cuts start to bite. It sees household expenditure improving from next year, growing at 1.2 per cent, picking up to 2.8 per cent growth in 2017. This offsets a meagre outlook for net trade, which the OBR sees growing by just 0.1 per cent a year between now and 2017.

There was some better news on employment. In line with the robust employment figures registered over the past year, the OBR now expects the number of people claiming dole to peak at just 1.63 million in 2014, 63,000 less than it anticipated in December. Similarly, it thinks the unemployment rate will peak at 8 per cent in 2014, rather than 8.2 per cent this year.

But there was no disguising the abysmal broader outlook. The OBR predicts that economy will still be 2 per cent smaller in 2017 than it was in 2007, pointing to a lost decade of growth.

If the OBR is right, the economy will be 15 per cent smaller that if pre-2007 growth trends had continued.

Suggested Topics
Start your day with The Independent, sign up for daily news emails
ebooks
ebooksAn introduction to the ground rules of British democracy
Latest stories from i100
Have you tried new the Independent Digital Edition apps?
Independent Dating
and  

By clicking 'Search' you
are agreeing to our
Terms of Use.

iJobs Job Widget
iJobs Money & Business

Recruitment Genius: Sales Assistant / Buyer

£15000 - £17000 per annum: Recruitment Genius: This company offers a range of ...

Recruitment Genius: Customer Service Advisor

£15000 - £16000 per annum: Recruitment Genius: Customer Service Advisors are r...

SThree: Trainee Recruitment Consultant

£20000 - £25000 per annum + OTE £45K: SThree: SThree were established in 1986....

Recruitment Genius: Compliance Manager

£40000 - £60000 per annum: Recruitment Genius: A Compliance Manager is require...

Day In a Page

The Greek referendum exposes a gaping hole at the heart of the European Union – its distinct lack of any genuine popular legitimacy

Gaping hole at the heart of the European Union

Treatment of Greece has shown up a lack of genuine legitimacy
Number of young homeless in Britain 'more than three times the official figures'

'Everything changed when I went to the hostel'

Number of young homeless people in Britain is 'more than three times the official figures'
Compton Cricket Club

Compton Cricket Club

Portraits of LA cricketers from notorious suburb to be displayed in London
London now the global money-laundering centre for the drug trade, says crime expert

Wlecome to London, drug money-laundering centre for the world

'Mexico is its heart and London is its head'
The Buddhist temple minutes from Centre Court that helps a winner keep on winning

The Buddhist temple minutes from Centre Court

It helps a winner keep on winning
Is this the future of flying: battery-powered planes made of plastic, and without flight decks?

Is this the future of flying?

Battery-powered planes made of plastic, and without flight decks
Isis are barbarians – but the Caliphate is a dream at the heart of all Muslim traditions

Isis are barbarians

but the Caliphate is an ancient Muslim ideal
The Brink's-Mat curse strikes again: three tons of stolen gold that brought only grief

Curse of Brink's Mat strikes again

Death of John 'Goldfinger' Palmer the latest killing related to 1983 heist
Greece debt crisis: 'The ministers talk to us about miracles' – why Greeks are cynical ahead of the bailout referendum

'The ministers talk to us about miracles'

Why Greeks are cynical ahead of the bailout referendum
Call of the wild: How science is learning to decode the way animals communicate

Call of the wild

How science is learning to decode the way animals communicate
Greece debt crisis: What happened to democracy when it’s a case of 'Vote Yes or else'?

'The economic collapse has happened. What is at risk now is democracy...'

If it doesn’t work in Europe, how is it supposed to work in India or the Middle East, asks Robert Fisk
The science of swearing: What lies behind the use of four-letter words?

The science of swearing

What lies behind the use of four-letter words?
The Real Stories of Migrant Britain: Clive fled from Zimbabwe - now it won't have him back

The Real Stories of Migrant Britain

Clive fled from Zimbabwe - now it won’t have him back
Africa on the menu: Three foodie friends want to popularise dishes from the continent

Africa on the menu

Three foodie friends want to popularise dishes from the hot new continent
Donna Karan is stepping down after 30 years - so who will fill the DKNY creator's boots?

Who will fill Donna Karan's boots?

The designer is stepping down as Chief Designer of DKNY after 30 years. Alexander Fury looks back at the career of 'America's Chanel'