The UK Coalition government has reached the halfway point in its term of office. When the Chancellor announced his master plan in the summer of 2010, he must have hoped that the worst of the fiscal pain would be behind him by now. Economic growth was supposed to be just shy of 3% in 2012 with a similar out-turn anticipated in 2013. Meanwhile, it was projected that by 2014/15 the cyclically adjusted current budget (the day‐ to‐day public spending not linked to the downturn of the economic cycle) was set to be in surplus and public sector net debt (the overall stock of national debt) would be falling as a share of GDP. Back in 2010, the Chancellor also unveiled a new set of fiscal rules that were supposed to be superior to the old set. The UK was proclaimed a safe haven.
UK faces up to austerity
Fast forward to the present day and the picture looks less rosy with most of the UK’s fiscal adjustment still to come. Now, the UK’s ‘Triple A’ credit rating is under threat and the UK has to borrow almost £200bn more than it thought 2 1⁄2 years ago. The media coverage over the last 24 hours or so should leave nobody in any doubt that tough economic times lie ahead and well into the next parliament. Here’s an analysis of the Chancellor’s Autumn statement from Richard Ramsey of Ulster Bank.