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David Prosser: Clinton's timely warning for the UK

Friday 08 July 2011 00:00 BST
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Outlook Even former President Bill Clinton is worried about the parlous state of the British economy, it seems. Wading into the debate about US debt yesterday, Mr Clinton cited the UK as an example of how an austerity drive might do more damage than good to an economy, if undertaken too quickly and dramatically.

Mr Clinton has skin in the game, of course. He wants to ensure the US deficit hawks do not get things all their own way in the battle over cuts. Still, his remarks looked prescient given the forecast issued by the National Institute for Economic and Social Research (NIESR) shortly after he spoke – as we report opposite, it reckonsthat economic growth in the UK slipped back to just 0.1 per cent in the second quarter.

By its own admission, the NIESR has a forecasting error of up to 0.2 per cent built into its model, so the second quarter may even have been negative. Even if not, this is really dangerous territory, miles off the sort of growth on which the Office of Budgetary Responsibility has been basing all its projections for 2011.

Whatever the actual figure comes in at, George Osborne will no doubt argue that he has no choice but to stick to the course he has set at the Treasury. But whether or not the Chancellor wants to concede any ground in public, he had better start dusting down the Plan B dossier that everyone knows is in the filingcabinet somewhere.

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