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UK ‘On Track to Reduce Budget Deficit’: Ex-BoE Official

Latest figures of the UK’s net public borrowing were in line with forecasts and suggest the UK is making good progress in tackling its high deficit, Professor Andrew Sentance, former Bank of England Monetary Policy Committee (MPC) external member and senior economic adviser at PwC told CNBC Tuesday.

London Financial District
Photo: Vulture Labs | Getty Images
London Financial District

“The government was probably hoping that the figures would come in below that forecast but the fact that it is broadly in line suggests we are on track to gradually get deficit down,” Sentence, who was widely regarded as a hawk while at the MPC told “Worldwide Exchange.”

He added that January was a good month because of increased tax receipts but there was nothing to be “terribly worried” about.

However the UK’s debt to GDP ratio is still very high despite the austerity measures implemented by the UK’s coalition government since 2010.

Sentance said despite the high figure, this was common among countries with a deficit above a certain threshold.

“If you’re above a certain threshold, you can’t avoid the debt to GDP ratio, so you need to get down to 3 to 4 percent of GDP to start that debt to GDP ratio coming down again,” he said.

The UK has so far avoided technical recession—two consecutive quarters of downward growth—but the last three months of 2011 showed the economy had contracted by 0.3 percent. Figures for the first quarter of this year will be crucial in determining a recession and the possibility of retaining the country's coveted triple A credit rating rating.

Sentance said that his warning about rising inflation was now beginning to concern other members within the Bank of England’s MPC.

“What I said about inflation being more stubborn and the underlying forces of inflation were stronger is beginning to trouble other members of the MPC,” he added.