United States Budget: Economic Impact

Lord Roberts of Conwy Excerpts

Monday 10th December 2012 Lords Chamber

Asked By

[Lord Roberts of Conwy]

To ask Her Majesty’s Government what assessment they have made of the effect on the United Kingdom economy of the outcomes of the “fiscal cliff” discussions in the United States of America.

[Lord Newby]

My Lords, the Office for Budget Responsibility, which is responsible for producing independent economic and fiscal forecasts for the UK economy, based its forecasts last week on the assumption that fiscal policy will be tightened in the US by between 1% and 2% of US GDP. This, in turn, assumes that the US Congress will reach a budget settlement by the end of the year and that the fiscal cliff will be avoided.

[Lord Roberts of Conwy]

Is my noble friend aware, as I am sure he is, that many believe that unless the end-year fiscal crisis in the US is averted, involving as it does some hundreds of billions of dollars’ worth of tax rises and spending, there is a risk that the US could return to recession, and the prospects for our exporters to the United States could be very gloomy indeed? Such prospects are already gloomy in the eurozone and other countries where lower growth is anticipated. Is there a specific remedy for that situation, should it develop?

[Lord Newby]

My Lords, I agree with the noble Lord that the US economy is extremely important to our exporters. Last year, we exported £80 billion of goods and services to the US, which amounted to 16% of our total exports. However, perhaps I have watched too many episodes of “The West Wing” but I suspect that a deal on the US budget will be done in time, albeit at the last minute.