Chancellor's austerity measures causing UK 'lasting damage', NIESR warns The think-tank estimated that a temporary boost to Government investment equivalent to 1pc of gross domestic product, or £15bn, could add 0.7pc to growth this year - assuming the Bank of England did not raise interest rates. It would potentially knock 0.3 percentage points off the unemployment rate this year, equivalent to roughly 100,000 people, it added. NIESR said that while there was a risk temporary fiscal expansion would result in an increase in gilt yields, it was "unlikely," because the Government's clear commitment to fiscal consolidation in the long run "should allow a response to near-term developments with no loss of confidence from financial markets." A spokesman for the Treasury said: "NIESR have said today that the Government's actions have helped maintain market confidence and that a temporary fiscal stimulus could risk higher interest rates - and that is precisely why we are committed to tackling the deficit. They also expect the Government to meet its fiscal mandate and for the UK economy to grow more strongly than the euro area this year and next. NIESR cut its 2012 UK growth forecast to -0.1pc from an October forecast of 0.8pc, reflecting a weak outlook for household spending and business investment, as well as domestic and foreign demand. It said the economy was likely to shrink by 0.2pc and 0.1pc in the first and second quarters of 2012 respectively, following a 0.2pc contraction in gross domestic product in the final three months of 2011. It predicted the unemployment rate - currently at 8.4pc - would peak at about 9.1pc this year.