'˜Pace of austerity will increase over next parliament' - top economist

The pace of the reduction in public spending will increase during the rest of this parliament, one of the country's top economists has predicted on the eve of Philip Hammond's debut budget.
Ian Stewart, chief economist at Deloitte.Ian Stewart, chief economist at Deloitte.
Ian Stewart, chief economist at Deloitte.

Ian Stewart, chief economist with accountancy giant Deloitte, told The Yorkshire Post that while the economy is growing faster than many analysts had predicted, the Government was still only around midway through its programme for reducing the nation’s deficit.

In a wide-ranging interview Mr Stewart called upon the chancellor to retain Britain’s reputation as a strong place to do business and to make it more attractive to foreign capital.

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In particular he suggested improvements to infrastructure and secondary education - two key issues for Yorkshire’s economy - as means in which Mr Hammond could further bolster Britain’s economic potential.

File photo dated 16/03/16 of the Chancellor of the Exchequer's red Ministerial box.File photo dated 16/03/16 of the Chancellor of the Exchequer's red Ministerial box.
File photo dated 16/03/16 of the Chancellor of the Exchequer's red Ministerial box.

“A very deep financial crisis has a very profound effect on the public finances which lasts a very long time,” Mr Stewart said.

“The good news for the chancellor is that the economy is growing much faster than anyone expected six months ago. The performance of the economy has been more solid since the referendum and actually growth accelerated into the end of last year.

“The big picture is still one of a very long-term programme to reduce the deficit. We are probably about halfway through a 13-14 year programme to eliminate the deficit. If you date it from 2010, it is probably not going to be until the early part of the 2020s until it is eliminated. There is still this big story about us having this deficit which is three-and-a-half per cent of GDP. And in fact the pace of the reduction of public sector spending will increase through this Parliament. So, I think that is the central fact around which everything else revolves.”

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Mr Stewart also predicted that there would be a period of transition agreed following the two year negotiation period that Article 50 will trigger and that businesses are currently “getting on with it” and remaining “pretty upbeat”.

Brexit Chancellor.Brexit Chancellor.
Brexit Chancellor.

“This is the biggest change in the business environment in 40 years, maybe since the war,” he said.

“So the question is are there things the Government can do anyway that improve the attractiveness of the UK, particularly to foreign capital?

“My own view is that if you look at the UK it is a very good place for business. And I think Brexit, if anything, increases the case for the Government to do things that improve the attractiveness of the economy to businesses.

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“The two areas where the UK could do better are infrastructure generally and secondary education. Brexit creates opportunity to think afresh about the business environment and how you grow the economy. This is an economy of formidable strength and those two areas strike me as warranting further investment.

File photo dated 16/03/16 of the Chancellor of the Exchequer's red Ministerial box.File photo dated 16/03/16 of the Chancellor of the Exchequer's red Ministerial box.
File photo dated 16/03/16 of the Chancellor of the Exchequer's red Ministerial box.

“A lot of infrastructure is prosaic, road widening or improving existing assets, not great new schemes. These marginal incremental improvements make a real difference to capacity.

“And those kinds of improvements are easier and quicker than HS2 or HS3 or [an additional runway at] Heathrow.”

Mr Stewart added that Britain’s willingness to play a continuing role in the world would also serve it in good economic stead.

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“The UK is clearly a very outward facing economy, and the Prime Minister in making her statement on Brexit used the word global several times. Although people make the comparison between Brexit and the US election, and clearly there are some comparisons, in the US there is much more scepticism about free trade and globalisation whereas here it is, if anything, the reverse.”