On the day when the UK Government is expected to announce inflation has hit record heights, an influential group of financiers has said the economic situation in the country has deteriorated over the last three months and drastic action is needed to redress the balance.
Rate more than double the target
The continuing spiral of increased costs affecting fuel, food, heating and home insurance quotes will be reflected in today’s latest inflation figures. Experts expect the figure to be around 5.2%, well over the Bank of England’s target of 2% and one of the main reasons why growth in the economy is coming to a grinding halt. The Governor of the Bank of England (BoE) will once more have to write to the Chancellor telling him where we went wrong!
Experts fear trouble ahead
It is against this worrying backdrop that the Ernst and Young ITEM club, a collective of economic and financial experts warn the Government that the British economy is at a “dangerous junction”. The financial experts have slashed their expectations of growth in the UK economy drastically from their prediction in the summer and now expect the home economy to grow by less than 1% in 2011 and by only 1.5% in 2012.
Easing policy wrong
The ITEM club went on to say that the BoE’s Quantitative easing programme is misguided and that the £75 billion pumped into the money supply will not do anything for exports and business investment, the two factors they believe will pull the economy round. The Euro Zone crisis is of course having its effect on the UK but the club have offered advice to Chancellor George Osborne in the shape of a few policies of their own.
Chancellor urged to help housing market
They suggest another cut in stamp duty will get homeowners thinking about purchasing new household insurance on a new property which in turn will help the building industry. They urge the BoE to instigate a further cut in interest rates to 0.25%, this they think will convince even more homeowners that they can afford to move, and in any case will give consumers more disposable income they can go out and spend. They also suggest the Chancellor cuts National Insurance rates for under 21’s in a bid to stop the unemployment rate hitting three million in the months to come.