Reports boost Major's chance

BRITISH Prime Minister John Major's hopes of fighting the general election against a background of growing economic prosperity are boosted today by a series of reports predicting accelerating growth and rising demand for homes and consumer goods.

However, the reports warn that the strength of consumer demand will force the next British government to cool the economy by raising taxes and interest rates, possibly within months of the election.

The new administration will need to curtail high public borrowing and rising inflation, according to studies by Cambridge Econometrics, Oxford Economic Forecasting and Lloyds Bank.

All expect the British economy to grow strongly in 1997, with gross domestic product predicted to rise from 2.4 per cent to 3.3 per cent this year by the Cambridge and the Oxford research organisations.

But growth is forecast to fall to as low as 1.8 per cent in 1998 by Oxford Economic Forecasting and to 2.8 per cent by Cambridge Econometrics.

Cambridge Econometrics says that history could repeat itself with a Labour government taking, over from a Conservative administration when the economy was passing its cyclical peak, as in 1964 and 1974.

Cambridge Econometrics is concerned at the high level of the public sector borrowing requirement which stands at £26.5 billion for 1996/97 and £19 billion for 1997/98. It warns that some tax increases will be necessary to reduce borrowing and to finance spending. But it predicts that GDP will grow at an average annual rate of about 2.5 per cent up to 2010 with unemployment falling from 2 million to about 1.5 million over the period.

Meanwhile, a study published by Lloyds Bank of 2,000 middle ranking British businesses, with turnovers of £1 million-£100 million, shows many expect to raise prices this year to pay for increased, investment and employment.