Deficit reduction has 'stalled' and treasury sistorting figures with 'gimmicks', say NIESR
The public finance numbers have been severely distorted by a number of what are essentially accounting gimmicks and deficit reduction has stalled, the National Institute of Economic and Social Research (NIESR) has said in its response to the 2013 Budget.
NIESR’s also said that the government’s ‘Help to Buy’ scheme “largely represents a subsidy to an unreformed banking sector”.
“The public finances have been distorted by a flurry of transfers and adjustments. Looking through these, deficit reduction has stalled, as receipts fall as a consequence of the weak economy,” NIESR said in its response to Wednesday’s budget.
The slight fall in borrowing in 2012/13 is entirely due to the government’s decision to delay certain payments, including to international institutions, the report says, adding that this is “unlikely to enhance the UK’s reputation for sound and transparent management of the public finances”.
Of the chancellor’s coveted ‘Help to Buy’ scheme, NIESR calls it “a not-so-hidden subsidy from taxpayers at large to the banking sector“.
“It may push up house prices in London and the South-East, but it will do nothing to address the fundamental problems in our housing finance system”.
The report continues:
“But the real news is the £12 billion contingent liability created for a mortgage guarantee on the riskiest slice of riskier mortgages is an entirely new proposal. The economic rationale for designing a mortgage market intervention in this way is almost impossible to understand.”
It adds that the scheme will push up prices and ultimately result in a “further re-distribution of wealth from non-house owners to house owners”.Like this article? Sign up to Left Foot Forward's weekday email for the latest progressive news and comment - and support campaigning journalism by making a donation today.