IoD response to Office of Budget Responsibility forecast

Dated: 29 November 2010

Responding to the latest Office of Budget Responsibility (OBR) forecast, Graeme Leach, Chief Economist at the Institute of Directors, said:

“The OBR’s 2011 GDP growth forecast still looks a bit optimistic even after the downgrade. We face very strong headwinds next year. Real take home pay faces a sharp squeeze and the savings ratio is already very low. Throw in ongoing problems in the financial system and anaemic money supply growth and our judgement is that the economy will be weaker than expected.

On public sector jobs, he added:

“The really interesting story from the OBR is the slashing in public sector job losses from 490,000 to 330,000. This means that the projected public sector employment losses are almost half those seen in the 1990s. The peak-to-trough reduction in public spending in the 1990s was 7.4 per cent of GDP. The comparable reduction now is 7.9 per cent of GDP by 2015-16. So the spending squeeze is on a par with the 1990s but the employment shake-out is far less. This is puzzling even when we allow for a greater burden of the cuts falling on welfare spending this time around.”

ENDS

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Edwin Morgan
Media Relations Manager
Institute of Directors, 116 Pall Mall, London SW1Y 5ED
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Mob: +44 (0)7814 386 243
Email: edwin.morgan@iod.com
Website: www.iod.com/policy

Notes to editors

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