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21 September 2011

The Osborne effect

Growth is now expected to be just 1.2 per cent in 2011.

By George Eaton

Raise VAT to a record high of 20 per cent, spread the myth that Britain is on the “brink of bankruptcy”, cut spending before the economy is out of the recovery phase (240,000 public sector jobs have been lost in the past year – three times as many as forecast) and don’t be surprised if growth falls away.

The Treasury has just published its round-up of independent growth forecasts and the economy is now expected to grow by just 1.2 per cent this year. The graph below shows how forecasts have been continually revised downwards as growth has plummeted (the economy has grown by just 0.2 per cent in the last nine months).

Average of independent forecasts for 2011 growth

A

Source: Treasury.

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Almost every developed country has had to slash its growth forecasts as the global economy has deteriorated but few more so than Britain. Of the G7 countries, only disaster-ravaged Japan has grown more slowly than the UK in the last 12 months. The conclusion is clear: plan A isn’t working. The longer George Osborne remains in denial, the harder the eventual U-turn will be.

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