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PBR LATEST: Chancellor cuts growth forecasts

Date: 09 October 2007   |   Author: Rupert Saunders

The Chancellor, Alistair Darling, admitted in his Pre-Budget report that business growth will slow in the next two years but insisted that the UK economy remained stable and healthy.

He said that his spending plans would "take no risks with unaffordable promises that put the public finances at risk" and that the Government would continue to balance its books. Net borrowing is forecast to fall and Government departments are expected to find an extra £30bn of savings by 2010, on top of the £20bn already achieved.

The Chancellor forecast that GDP growth this year will remain at 3% but will drop back to 2% to 2.5% next year. This is in line with current analyst expectations with the CBI predicting 2.2% in 2008.

Darling blamed "increased economic uncertainty" and turbulence in financial markets in America, Asia and Europe. He sees stability in 2009 with growth returning to 2.5% to 3.0%.

More encouragingly, the Chancellor said he expected inflation to stay "on target" at 2% through 2008 and 2009. This suggests the Government is not expecting further interest rate rises.