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Austerity in the UK could last until 2018 warns Think Tank

Austerity in the UK could last until 2018 warns Think Tank

The era of austerity could last until 2018 as George Osborne may be forced to announce billions of pounds of further spending cuts in next week’s budget statement as the weak economy makes it increasingly difficult for him to meet his fiscal rules, a leading economic think tank said on Monday.

The Institute for Fiscal Studies said the additional spending cuts–which it believes could be as high as £11 billion ($17.5bn) would see the era of austerity last until 2017-2018, meaning the squeeze will run for eight years rather than the five years Mr Osborne originally planned. In a separate report Monday, centre-right political think tank the Centre for Policy Studies called for Mr Osborne to use the budget statement on Dec 5 to announce an overhaul of the tax relief given on wealthy Britons’ pension contributions relief that costs the government £7bn a year. They also added that the Chancellor will be forced to announce even more bad news for British taxpayers if he is to hit his “fiscal mandate”.

In the FX market, GBP/USD is set to remain a by-product of the sentiment stemming from the news-flow relating to the Eurozone sovereign debt crisis which enters a crucial stage given that very little progress has been achieved in dealing with Greece. Especially as the country is yet to receive the much needed aid tranche from the international lenders. In terms of technical levels, supports are seen at the 10DMA line at 1.5902, 1.5856 which is the 200DMA line and then at 1.5826. On the other hand, resistance levels are seen at 1.6020/43 and then at the 55DMA line at 1.6061.

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