Britain's fiscal austerity still has a long way to go: experts

Though the British economy is on the track of recovery, the country's fiscal austerity still has a long way to go, said Capital Economics, a London-based economic research company, on Thursday.

 "With the economic recovery yet to have much impact on the government's popularity, Chancellor of the Exchequer George Osborne may be tempted to use the proceeds of stronger growth to fund a small giveaway in the Autumn Statement," said Roger Bootle, managing director of Capital Economics, in the latest report on the British economy.


 "But the big picture is that the fiscal consolidation still has a long way to go," said Bootle.


 Osborne is expected to deliver his fourth Autumn Statement on next Thursday, or on Dec. 5, against the backdrop of economic improvement this year.


 British gross domestic product (GDP) grew at 0.8 percent in the three-month through September this year, marking the strongest upsurge since the spring of 2010, data showed.


 The Office for Budget Responsibility (OBR) is expected to revise its forecasts for the economy sharply upwards, with the GDP growth projections for both this year and the next rising by up to 1 percent, said Bootle.


 "Osborne may save the full proceeds of growth to bring borrowing down more quickly, or to reduce the size of the further onerous spending cuts still faced by unprotected departments," forecasts Bootle.


 Simon Wells, Chief UK Economist of HSBC, also said that Osborne will argue that the policy of fiscal consolidation has been vindicated, but there is still much to do with four more years of planned fiscal consolidation to come.


 "The economy is moving in the right direction, but there is a long way to go," said Wells in HSBC's Economics UK report released Thursday.


 HSBC expects the British economy will grow 1.4 percent in 2013. The bank also forecasts gilt, or the British government bonds, issuance of 148 billion pounds (241 billion U.S. dollars) in fiscal year 2013/14.


 "We expect a cumulative reduction in government borrowing over the next three fiscal years of around 60 billion pounds relative to the OBR's March projections," said Wells. (1 pound = 1.63 U.S. dollars)