The Bank of England’s downgrade of UK growth prospects is not surprising, but leaves it at variance with the Treasury forecasts published in the last Budget. The Treasury forecast 0.8% growth in 2012, 2% in 2013, 2.7% in 2014 and 3% in 2015. This made a total of 8.7% for the four years.
Looking at the Bank’s fan chart, they have growth well down for each of those four years, with a total of around 5% and a peak level of around 2% not 3%. If the Bank is right and the Treasury have to lower their forecasts next time, that will mean a further addition to state borrowing levels, as the automatic stabilisers will mean less tax revenue and more benefit spending than the Treasury forecasts.