Chiswickite - formerly The Croydonian

Labels: The Reckoning

"The United Kingdom is under the excessive deficit procedure since July 2008, when the Council recommended, on the basis of a Commission proposal, to bring the general government deficit below 3% of GDP by 2009/10. But since then the budgetary situation has worsened substantially on account of the sharper-than-expected economic slowdown and the deficit-increasing discretionary measures adopted by the UK in line with the European Recovery Plan.

According to the 2008 update of the UK's convergence programme, the deficit in 2009/10 is projected to reach 8.2% of GDP, with the discretionary loosening accounting for around one-third of the increase over the previous year. The January forecasts of the Commission envisage an even sharper contraction in economic activity and project a deficit in 2009/10 of 9½% of GDP. The government gross debt ratio, which was close to 40% of GDP in 2007/08, is expected by the UK authorities to rise considerably to almost 70% of GDP in 2013/14.

Against this background, the Commission recommends to the Council to decide that, in a context of progressively weakening economic conditions, the UK authorities have not taken effective action to end the excessive deficit situation by 2009/10 and to adopt a new recommendation under Article 104.7 setting a new deadline of the 2013/14 financial year to correct the deficit below 3%. To this end, the UK authorities are asked in 2010/11 and beyond, to ensure additional annual efforts beyond those envisaged in the 2008 update of the UK's convergence programme. The UK is also recommended to reverse progressively the increase in the government gross debt ratio".

Labels: the recession, The Reckoning

Tessa Jowell: I completely, utterly and comprehensively do not recognise an Olympic event there.

Labels: Parliament, The Reckoning

• Britain will suffer a far deeper recession than either the UK Treasury or IMF predicts. GDP is forecast to contract by 3.5% in 2009, followed by a shallow 0.2% recovery in 2010. Unemployment will peak at 3.2 million next year, an 11.2% rate, with the financial services sector set to lose 570,000 jobs between 2008 and 2010.

• Despite enjoying 11 years of strong growth between 1997 and 2007, the UK ran a budget deficit of 1.7% of GDP over this period, fuelling a fiscal time bomb. Faced with the financial burden of bailing out the banking sector and kick-starting the economy, the budget deficit will swell to an unsustainable 9.3% of GDP in 2009, and average 6.7% over the following four years.

• Property prices will see a cumulative fall of 41%, from peak to trough, and could take more than 10 years to recover to the levels of 2007. The impact of negative equity and declining asset values will further serve to depress consumer spending and economic growth.

"The UK has also suffered a steep fall in BMI's short-term Political Risk Rating table, slipping 16 places since the start of 2008 to 31st place out of 150 ranked states. A key factor here is the government's diminishing policy credibility, which is seen to be endangering long-term fiscal sustainability. With the added uncertainty of parliamentary elections due by May 2010, the UK's political risk ranking could well dip lower over the next year.

Another area of concern examined by the report is the current state, and future prospects, of the British labour force. Continuing shortcomings in the education sector, combined with an array of damaging social and demographic trends, have weighed heavily on the UK's deteriorating Labour Force Quality index. Amongst a peer group of 20 developed and key emerging economies the UK is ranked 9th overall - below Canada, the US and Germany - and fares particularly badly on the health (10th) and social & Demographic (13th) indicators. Most worryingly, though, on the Future Opportunities component (which measures the potential for future improvement in the Labour Force Quality Index), the UK lies in 16th place".

More at the site linked, or the whole report for anyone who fancies forking out $130.

Labels: the recession, The Reckoning

Labels: fun with statistics, psephology, The Reckoning