The OECD has warned Gordon Brown he needs to take "further measures" to slash Britain's public finance deficit if spending overshoots the Government's targets and tax receipts come in lower than expected.
The rich nations' think-tank put the Chancellor on notice yesterday that a "decisive reduction" in the deficit, which exceeded the Maastricht Treaty limit of 3 per cent last year, would be required in the event that "fiscal developments" failed to meet his 2005 Budget projections.
In its twice-yearly assessment of the world economy the OECD forecast the UK economy would grow just 1.7 per cent this year, below even where Mr Brown is likely to cut his official forecast in Monday's pre-Budget report.
The OECD blamed the sharp slowdown in UK growth on weaker consumption and the end of the house price boom. But it predicts growth will lift to 2.5 per cent next year and 2.75 per cent in 2007. Even so, there is no "compelling case" for further interest rate cuts with inflation above target, it added.
Vince Cable, the Liberal Democrat Treasury spokesman, called on Mr Brown to "stop blaming the slowdown on high oil prices and exports, and turn his attention to home-grown problems".
Despite the UK's lacklustre contribution, global economic growth has been "exceptionally vigorous" in the past few months, fuelling the surge in oil and commodities prices. The Paris-based body forecast 2.9 per cent growth in 2006 and 2007 after 2.7 per cent this year across its 30 member countries.
Jean-Claude Trichet, the president of the ECB, has hinted that he plans to raise eurozone interest rates tomorrow for the first time in two years.Reuse content