As growth is downgraded, will Darling be vindicated?

By Mark Ferguson / @markfergusonuk

The new Office of Budget Responsibility reported today that projected growth for 2011 is down to 2.6% for 2011 from the 3.25% predicted by the Treasury under Labour. The OBR also believe that borrowing will be lower than anticipated, but the structural deficit will be higher.

Interestingly, Sir Alan Budd, the head of the new authority, said that Alistair Darling’s 2010 budget would have “eliminated the bulk of the structural deficit by 2015”.

However David Kern, Chief Economist at the British Chambers of Commerce believes that the OBR predictions are still too optimistic:

“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.”

The line that the OBR projections are still to optimistic is already being circulated by Conservative special advisors, and is likely to be one we’ll hear from Osborne and others over the next few days. However, Labour in general, and Darling in particular, will surely counter that is the OBR has been optimistic, and growth isn’t as strong as it appears, then planned Tory cuts could hamper the recovery.