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More bad news on the economy for PM
Hugo Duncan, Evening Standard21.05.08
Gordon Brown today faced more dismal economic news.
The Prime Minister was rocked by figures showing the nationalisation of Northern Rock had added nearly £100 billion to public debt and breached one of the Treasury's key fiscal rules.
There was also a stark warning from mortgage lenders that conditions in the housing market will "get worse before they get better", with prices falling seven per cent and sales 35 per cent this year. Meanwhile, hopes of interest rate cuts over the summer were dashed after just one of the Bank of England's nine-strong monetary policy committee voted for a rate cut.
The Bank has cut rates from 5.75 per cent to five per cent since December but they now look set to remain on hold in the coming months amid fears over rising inflation.
It made grim reading for Mr Brown and the Government only hours before voters in Crewe and Nantwich go to the polls.
The Office for National Statistics today said that public sector net debt stood at 43.1 per cent of gross domestic product at the end of March after the nationalisation of Northern Rock added £92.4 billion to the balance sheet.
That is above the 40 per cent ceiling dictated by the Treasury's Sustainable Investment Rule and economists said it highlighted the miserable state of the public finances. "The public finances are in a worryingly poor position to cope with the coming downturn in the economy," said Jonathan Loynes of Capital Economics.
The Council of Mortgage Lenders said lending in March and April was 16 per cent down on the same months last year. It replaced its forecast for the 2008 market, made in October, of a one per cent annual rise with a prediction of a seven per cent slump.
