“We welcome the establishment of the OBR – a body that should provide much-needed transparency and objectivity to the economic policymaking process. In the longer-term, the OBR could prove almost as important for UK economic governance as the creation of the Monetary Policy Committee in 1997.
The new forecasts are more realistic than those in the March budget, but the growth expectations are still overly optimistic. For the world economy, the expectation that growth will return fairly rapidly to the levels seen before the recession is too rosy - especially given the current eurozone problems and worrying signs that the US recovery may be stalling.
In the UK, the expectation of growth in excess of 2.5% in each year from 2011 onwards may prove difficult to achieve. But, these are pre-budget forecasts and the big test will come when we see how these forecasts are revised following the Chancellor’s emergency budget.”