Select Committee on Treasury Second Report

2  The public finances

The overall fiscal position


21. As we have already noted, the Treasury has revised output growth for 2006 from 21/2% in the 2006 Budget to 2¾% in the 2006 Pre-Budget Report.[99] A more optimistic forecast of economic growth would generally be expected to lead to a more optimistic forecast of the position of the Government's finances—in this case a reduction in the forecast public sector current budget deficit in 2006-07. The expectation would be for tax revenues to increase as a result of higher household incomes and higher receipts from business. However, the Treasury forecast a slightly higher current budget balance deficit in the 2006 Pre-Budget Report than it had forecast at the time of the 2006 Budget. Its forecast of the current budget deficit for 2006-07 was £7.9 billion in the 2006 Pre-Budget Report,[100] compared to a forecast deficit of £7 billion at the time of the 2006 Budget.[101] A comparison of the forecasts of current receipts and expenditure in the two documents shows that this movement in the forecast fiscal position in 2006-07 results from changes in the forecasts of current expenditure rather than changes in revenue forecasts. The Treasury has increased its forecasts of current taxation for 2006-07, as would be expected given the higher level of output growth, but its forecasts of current expenditure and depreciation for 2006-07 have also risen.[102]

22. The 2006 Pre-Budget Report also contained a downward revision of forecasts of the current budget balances in the medium term compared to the forecasts at the time of the 2006 Budget. In March 2006, the current budget balances were forecast to be surpluses of £1 billion (0.1% of GDP) in 2007-08, £7 billion (0.5% of GDP) in 2008-09 and £10 billion (0.7% of GDP) in 2009-10.[103] In December 2006, the comparable forecasts were for a deficit of £1 billion in 2007-08 and surpluses of £4 billion (0.3% of GDP) in 2008-09 and £7 billion (0.5% of GDP) in 2009-10.[104] These downward revisions of forecasts of the current budget balance as a proportion of GDP result principally from revised forecasts for current receipts as a proportion of GDP rather than spending changes. In the 2006 Budget, current receipts as a percentage of GDP were forecast to be 40.9% in 2007-08, rising to 41.0% in 2008-09 and 2009-10.[105] In the 2006 Pre-Budget Report, tax receipts were forecast to be 40.2% of GDP in 2007-08, rising to 40.4% in 2008-09 and 2009-10.[106] Professor Miles saw the Treasury's overall forecasts as "quite a realistic assessment", albeit "a more pessimistic one than was made at the beginning of this year".[107] Despite the improved forecast for economic growth in 2006, the Treasury has not forecast an improvement in the fiscal position compared with its forecasts in the 2006 Budget, partly as a result of downward revision of forecasts for tax receipts in future years as a percentage of GDP. The Treasury's current fiscal forecasts may well be realistic, but they indicate the medium-term constraints that will form part of the context for the conduct of the 2007 Comprehensive Spending Review.


23. In our Report on the 2005 Pre-Budget Report we noted that the Treasury had over-estimated tax receipts for the current fiscal year for five consecutive years. We considered it important that "official forecasts for tax receipts avoid any systemic bias either to exaggerate or underestimate revenue, particularly towards the end of the economic cycle when forecasts are likely to come under particular scrutiny".[108] Table 1 sets out how forecasts for what is the current fiscal year at the time of the Pre-Budget Report have varied between the preceding Budget and each Pre-Budget Report. For each year up to 2005-06, Table 1 compares performance in each forecast with the outturn.

Table 1: Current tax receipts for fiscal year current at the time of the Pre-Budget Report

Forecast at Budget

£ billion

Forecast at Pre-Budget

£ billion


£ billion

Difference between Budget and actual

£ billion

Sources: Budgets, Pre-Budget Reports and End of year fiscal reports

Table 1 shows that the 2006 Pre-Budget Report has been the first Pre-Budget Report for five years in which the Treasury has not reduced its forecast of tax receipts in the current year. This may be attributable to higher than forecast output growth boosting income tax and Corporation tax receipts, along with more realistic forecasts on the part of the Treasury. The Table also demonstrates that the outturn for tax receipts in 2005-06 was above that forecast in the 2005 Pre-Budget Report and nearer to that foreseen at the time of the 2005 Budget.

24. The 2006 Pre-Budget Report contained revised forecasts for tax receipts in the years subsequent to 2006-07. The most notable change was to North Sea oil revenues for 2007-08, which, in December 2006, were forecast to be £2.8 billion (21%) below the total revenues forecast in the 2006 Budget.[109] Treasury officials attributed this downward revision to three factors:

  • increases in capital and operating costs in the oil industry, arising from increased competition for equipment and personnel;
  • a reduction in oil production in 2006, which had been significantly greater than the underlying, yearly downward trend; and
  • the depreciation of the US Dollar against Sterling, which had caused the oil price to fall in Sterling terms, leading to lower tax revenues for the United Kingdom.[110]

Mr Robert Chote of the Institute for Fiscal Studies argued that a distinction ought to be made between the Treasury's over-optimistic projections for 2007-08 North Sea oil tax revenues in its 2006 Budget and its over-optimistic projections of tax receipts in general between the 2001 and the 2005 Budgets. Previously, the Treasury had been over-estimating corporation tax receipts, in particular with regard to the rebounding of financial sector corporation tax receipts after the decline in the stock market between 2000 and 2002. However, he thought the Treasury now appeared to have corrected this forecasting error, making its forecast for corporation tax receipts "more sensible". Mr Chote told us that the shortfalls in the oil tax revenue would have been more difficult to predict, implying that this was not due to a systemic upward bias.[111] Ms Rosewell agreed that there was "an element of bad luck" with regard to the Treasury's over-optimistic forecasts of North Sea oil tax revenues in the 2006 Budget.[112] The Chancellor of the Exchequer told us that the downward revision of North Sea oil tax revenue was primarily due to a change in the production cycle in the North Sea and a change in the dollar exchange rate—both factors which were not within the Treasury's control.[113] We welcome the fact that the past concerns of the Treasury Committee about the apparent over-optimism of Treasury forecasts of tax receipts, and of corporation tax receipts in particular, appear at the moment to have been addressed. We note the significant downward revision of forecast North Sea oil revenues in 2007-08, and look forward to seeing whether the more cautious forecast proves to be accurate.


25. The 2006 Pre-Budget Report forecast that public spending in 2006-07 measured in terms of Total Managed Expenditure would be £2.3 billion above the total projected at the time of the 2006 Budget.[114] Total Managed Expenditure is divided between spending within Departmental Expenditure Limits—firm three-year limits for departments' programme expenditure—and Annually Managed Expenditure, including that on social security benefits, which is not subject to firm multi-year limits.[115] The increase in the forecast for Total Managed Expenditure for 2006-07 is caused by a £0.1 billion increase in the capital budget within Departmental Expenditure Limits and a £2.2 billion increase in the forecast of Annually Managed Expenditure since the time of the 2006 Budget, comprised of increases in the forecasts of social security benefits, tax credits, net public service pensions, central government gross debt interest and public corporations own-financed capital expenditure.[116] In order for the expenditure outturn in 2006-07 to be in line with the Treasury's forecasts of expenditure in the 2006 Pre-Budget Report, current expenditure can only be 5.0% above that in 2005-06.[117] According to the Institute for Fiscal Studies, expenditure in the first seven months of 2006-07 had been 7.1% above that in the equivalent months of 2005-06, suggesting that the Treasury expects a slowdown in expenditure towards the end of the financial year.[118]

26. Public expenditure in the years from 2008-09 to 2010-11 will be determined by the outcome of the Comprehensive Spending Review. The 2006 Pre-Budget Report contained an unchanged assumption that public sector current expenditure will grow by 2.0% in real terms in 2008-09 and by 1.9% in real terms in the three following years.[119] Current expenditure was forecast to fall as a proportion of GDP from 38.9% in 2006-07 to 38.2% in 2011-12, whereas net investment was forecast to be maintained at 2.2% of GDP.[120] When questioned about whether an actual slowdown in spending in line with the current assumptions was feasible, Dr Weale said that "governments can limit growth in public spending if they set their mind to it and the fact that we have had a period of rapid expansion is not an obstacle to that".[121] However, Mr Chote pointed out that tight public spending in the years 2000 to 2003 occurred when unemployment and debt interest rates were falling.[122] Such circumstances might not be present in the next economic cycle, making a slow down in the growth of public spending more difficult to deliver. Dr Weale drew attention to the possibility that increases in immigration might place an upward pressure on public spending in coming years. He stated that there was no evidence that the impact of net immigration on public spending had been taken into account in the 2006 Pre-Budget Report.[123] Mr Chote contended that an increase in net immigration would lead to a reduction in public spending per head of population, with implications for the quality of public services.[124] On the other hand, Treasury officials noted that some studies "suggest that immigrants contribute more fiscally than they consume".[125] We expect to consider these issues further when we report on our inquiry into the Comprehensive Spending Review: emerging issues.

The golden rule

27. Since 1997 the Government has put in place and sought to adhere to a new fiscal policy framework set out in the Code for Fiscal Stability. The Code requires the Government to state the rules through which fiscal policy will be operated. There are currently two fiscal rules—the sustainable investment rule, which is discussed further below,[126] and the golden rule. The golden rule states that, over the economic cycle, the Government will borrow only to invest and not to fund current spending. Compliance with the golden rule is evaluated by calculating the average of the Government's annual current budget balances as a percentage of GDP over the economic cycle. The current budget balance represents the difference between current receipts and current expenditure, including depreciation.[127]

28. The 2006 Pre-Budget Report stated:

The Government's judgement is that the current cycle started in 1997-98. Based on assumptions used in these projections the economy will return to its trend level, ending the current cycle in early 2007. The projections show that the Government is meeting the golden rule, on the basis of cautious assumptions, with an average annual surplus on the current budget over this economic cycle of 0.1% of GDP. On this basis, and based on cautious assumptions, the Government is meeting the golden rule and there is a margin against the golden rule of £8 billion in this cycle. [128]

In the 2006 Pre-Budget Report, the Treasury changed its forecast of the end-date of the economic cycle from 2008-09, which was its forecast at the time of the 2006 Budget, to early 2007. The Institute for Fiscal Studies stated that, "with just 3 months left to run, it is now highly unlikely that the golden rule will be missed".[129] Morgan Stanley's analysis of the 2006 Pre-Budget Report stated that, although the golden rule was likely to be met over this current economic cycle, "we are less optimistic that the public finances are on track to meet the golden rule over the next cycle".[130] The forecasts in the 2006 Pre-Budget Report showed that the current budget was predicted to return to surplus only in 2008-09.[131] Thus, if the economic cycle were to end as currently forecast in early 2007, and 2006-07 were to be counted as the first year of the next economic cycle, the next economic cycle would begin with two years of current budget deficits. This differs from the projection in the 2006 Budget, under which the new economic cycle would have begun in 2008-09, with the Government's current budget in surplus.[132] On the basis of its current forecasts of the length of the current economic cycle, the Government appears to be on track to meet the golden rule in the current economic cycle. However, the Treasury's forecasts also indicate that the Government will start the next economic cycle with its current budget in deficit, compared to the projections outlined in the 2006 Budget, which foresaw the Government starting the next economic cycle with its current budget in surplus.

29. Dating the beginning and end of an economic cycle relies on measuring the output gap in the economy. The output gap is the difference between the actual and potential output of the economy and requires knowledge of both the actual and trend rate of growth. Mr Cunliffe told us that the Treasury had changed its forecast of the end-date of the economic cycle for the 2006 Pre-Budget Report because economic growth in the years from 2003 to 2006 had been revised upwards. This led the Treasury to infer that the level of GDP was "closer to trend level", and consequently that the output gap was smaller than previously envisaged, making it more likely that the cycle would end earlier, in early 2007, rather than in 2008-09.[133] The Treasury provided a fuller explanation of how it measured trend growth and the output gap in its publication Evidence on the UK Economic Cycle in July 2005. For complete past cycles, the trend rate of output growth was estimated to be the average rate of growth between the points where the economy was on trend within the economic cycle. The Treasury stated that it used various sources of information to determine when the economy was on trend, including business surveys of capacity utilisation and recruitment difficulties; other labour utilisation indicators such as average hours worked, unemployment and vacancy rates; and indicators of inflationary pressure. A different approach had to be used for estimating the trend rate of growth for the latest (incomplete) cycle. This was based on disaggregating trend output over past cycles into trend labour productivity measured as output per hour worked; trend average hours worked per worker; the trend proportion of the working age population in employment; and the working-age population.[134]

30. In December 2005, the National Audit Office stated:

There is little doubt that dating the economic cycle is an uncertain process. There is no clear best methodology among those available for identifying on-trend points, and each has its advantages and disadvantages. The Treasury's method of using cyclical indicators to identify on-trend points is a reasonable one, bringing information of an economic nature to bear, though it is necessary to make judgements about the emphasis to be given to the indicators used, which may vary from assessment to assessment, and are difficult to make transparent.[135]

Mr Cunliffe admitted that "there is an element of judgement" in determining both the trend rate of economic growth and also where the economy was in the cycle.[136] Ms Rosewell noted that

there are still no well-established and empirically-verified theories of the cycle which could be used to anchor points at which a cycle begins or ends. Each cycle is unique. In these circumstances, policy has been locked onto a base which can only be created by the application of considerable amounts of judgement.[137]

According to the Treasury, since 1997, "the amplitude of the cycle has been much lower than in preceding cycles since the early 1970s, and lower than that experienced in the 1950s and 1960s".[138] Mr Chote had previously told us that this meant that the economic cycles were less easily identifiable, making the Treasury's task in judging where the cycle began and ended much harder.[139]

31. Dr Weale challenged the Treasury's judgement as to when the current economic cycle began.[140] He noted that the revisions to the data by the Office for National Statistics meant that the economy appeared to be above trend in 2003-04 as could be seen in Chart A3 in the 2006 Pre-Budget Report. He told us that the most obvious interpretation of the data would be that there were two economic cycles in the last decade, one which ended in 2003 or early 2004 and another which began in the same year, but which would draw to its close in early 2007. He further argued that "a three-year cycle is slightly rapid, but it is much closer to the normal sort of business cycle than the protracted ten-year cycle that the Chancellor of the Exchequer is describing".[141] Ms Rosewell called for the Treasury to clarify its judgements on the timing of the economic cycle.[142] Mr Chote was concerned that the 2006 Pre-Budget Report did not make an explicit statement that the Treasury had changed its forecast of the end-date of the economic cycle.[143]

32. Mr Cunliffe told us that the Treasury did not interpret 2003-04 as a "decisive move through trend", because other indicators such as inflation, earnings and some of the capacity indicators used to confirm the cycle did not suggest it.[144] However, the 2006 Pre-Budget Report did not contain further analysis of the role of these different factors in the overall Treasury judgement about the likely end-date of the current economic cycle. We understand that forecasting the start and end of the economic cycle is a complex matter and that there are no clear cut answers. We recommend that, in future Budgets and Pre-Budget Reports, the Treasury provide a fuller explanation of its current forecast of the start and end dates of the current economic cycle. Such an explanation should include, if applicable, the reasons why any movements in economic growth above or below trend have not been interpreted as marking the beginning or the end of an economic cycle.

33. There have been two other changes to the Treasury's estimates of the start and end dates of the current economic cycle in the past two years. In July 2005, the Treasury changed its estimate of the start-date of the economic cycle from 1999-2000 to 1997-98, a change which arose from the upward revision of figures on the United Kingdom's economic growth in 1997 and 1998 by the Office for National Statistics. At the time of the 2005 Pre-Budget Report, the Treasury revised the end-date of the economic cycle from early 2006 to 2008-09 as a result of a downward revision of growth forecasts at that time for 2005-06, which led it to infer that the economy was further below trend than previously envisaged and therefore that the cycle would end later. As we noted previously in our Report on the 2005 Pre-Budget Report, these changes had the impact of increasing the Government's chances of meeting the golden rule in the current economic cycle, all other things being equal.[145]

34. With regard to the latest change to the end-date of the economic cycle in the 2006 Pre-Budget Report from 2008-09 to early 2007, Mr Cunliffe told us that this was only provisional and could be subject to revision at a later date. He explained that the dating of the cycle is "a backwards-looking exercise" and that he could not confirm the new economic cycle would begin in early 2007 until the Office for National Statistics data was published in mid-2007.[146] The Chancellor of the Exchequer stated that, "the end of the cycle can only be judged after we have the full provision [of data] available to us… We assume that the cycle could end in 2007, but we are not making any statement that it has ended."[147] The Institute for Fiscal Studies stated in its analysis of the 2006 Pre-Budget Report that "there remains a strong case for an independent body to date the cycle".[148] The Chancellor of the Exchequer told us that the National Audit Office would be asked to audit the timings of the end of the economic cycle once the Treasury had made a firm judgement.[149] In our Report on the 2005 Pre-Budget Report, we recommended that the results of the National Audit Office audit should "be conducted and published alongside the Treasury's announcement of that judgment".[150]

35. The Treasury evaluates whether the golden rule is met through measuring the current budget balances over the economic cycle because it considers that this allows the fiscal balances to vary between years in line with the cyclical position of the economy, permitting automatic stabilisers to operate to help smooth the path of the economy in the face of variations in demand.[151] However, the difficulties in determining the start and end-dates of an economic cycle have led the International Monetary Fund to recommend that the golden rule be amended so that its application need not rely on the precise dating of the economic cycle: "Staff suggested that an exclusively forward-looking interpretation of the golden rule—for example, a rolling target of balance 3 years hence for the current budget—would reduce these drawbacks [of precisely measuring the economic cycle]".[152] Mr Chote shared this view, telling us that it would be better "to abandon the idea of trying to meet the golden rule over a fixed cycle but to say where you want to be over a sensible time horizon of three or five years and to approach it in a forward-looking way".[153] In our Report on the 2005 Pre-Budget Report, we too argued that the "golden rule's focus should be on ensuring that fiscal policy is sustainable on a forward-looking basis, rather than encouraging changes to tax levels or spending now as a consequence of data revisions relating to growth several years ago".[154] There also appear to be uncertainties as to how to the golden rule will be applied in the next economic cycle. When asked whether the last year of the economic cycle would be counted as the first year of the next economic cycle for the purposes of assessing whether the Government had complied with the golden rule, Mr Cunliffe replied that this was what the Treasury had done in the past, but that he did not know whether this was what they would do in the future.[155] The Governor of the Bank of England told our predecessors that, with regard to the golden rule, "looking backwards [over the economic cycle] is not entirely helpful". He thought that "what [is] significant is the need to look forward, and that is to look at the rules in terms of whether it is plausible in a forward looking sense that the rules will be met".[156] There is a tension between fiscal planning, which is a forward-looking process, and the assessment of whether or not the golden rule stands to be met in the present cycle, which is primarily a backwards-looking exercise. We recommend that the Treasury review the golden rule and consider the merits of whether that rule could be made more forward-looking and its application less dependent on estimates of the dating of the economic cycle. We further recommend that the Treasury clarify in its response to this Report whether the last year of the economic cycle will count as the first year of the next economic cycle, for the purposes of judging whether the golden rule has been met.

The sustainable investment rule

36. The objective of the sustainable investment rule is to ensure that the Government maintains sound public finances in the medium term. In order to meet the sustainable investment rule in the current economic cycle, the Government aims to maintain net debt below 40% of GDP in each and every year of the economic cycle.[157] The 2006 Pre-Budget Report forecast that the sustainable investment rule would be met over the current economic cycle. The projections for net debt in that document for what is currently expected to be the next economic cycle indicated that net debt would stabilise at 38.7% in 2009-10, before falling in 2011-12.[158] We have previously referred to concerns, which we heard again during our current inquiry, that 40% represents an arbitrary figure, but have also acknowledged "the essential role that the rule plays in ensuring that Government expenditure and investment today do not lead to an unfair or unsustainable burden on future generations".[159] In our Report on the 2005 Pre-Budget Report, we asked that the Treasury clarify whether, during the subsequent economic cycle, it proposed to interpret the sustainable investment rule as requiring that net debt be maintained below 40% of GDP in each and every year of that cycle.[160] Mr Chote told us that it was still unclear whether the Treasury would adopt this approach or whether it would aim to maintain net debt at an average of below 40% of GDP over the course of that economic cycle as a whole.[161]

37. Dr Weale suggested that the decision as to whether to undertake investment projects or not should not be determined by the sustainable investment rule, but be based on the projected returns to the projects compared to the costs of providing for them, including the costs of taxes which would be used to fund them. He further argued that maintaining the 40% limit risked the possibility that worthwhile investment projects with a positive rate of return would not be implemented.[162] Ms Rosewell thought that a distinction ought to be made between projects which generated revenues and ones which not did when determining Government levels of investment.[163]

38. Net debt increased by 0.4% of national income in 2006-07 as a result of the decision of the Office for National Statistics to classify some previously off-balance sheet debt as on-balance sheet. The revision occurred as a result of including estimates of finance lease liabilities in Private Finance Initiative (PFI) contracts, where the judgement was made that the Government had taken over the risks and rewards of the asset concerned.[164] The Government's estimate of its payments for PFI contracts for the financial years from 2006-07 to 2030-31 in the 2006 Pre-Budget Report was £158 billion, which was an increase of 11% (£15.6 billion) from its 2006 Budget estimate.[165] The amount of these forecast future payments indicates that any decision to classify more PFI liabilities as on-balance sheet has the potential to increase net debt by a significant amount. The Institute for Fiscal Studies stated that "a significant addition to net debt would increase the risk that the 40% ceiling will be breached over the medium term", while noting that "it could be argued that a significant change in the definition of net debt should be accompanied by an equivalent change in the ceiling under the sustainable investment rule".[166] Dr Weale argued that there could be a case for including public sector pension liabilities in net debt. He considered that one of the objectives of the fiscal rules ought to be to ensure that future taxes were kept constant as a proportion of GDP and, in order to do that, the rules would need to take into account the future payments arising from public sector pensions.[167] Both he and Mr Chote stated that, if public sector net debt were to include public sector pension liabilities, the upper limit of the sustainable investment rule ought to be adjusted accordingly.[168]

39. We continue to believe that the sustainable investment rule has considerable value in helping to assess the sustainability of public sector investment and the potential burden on future generations. However, with the Treasury now forecasting that a new economic cycle will begin in 2007 and the Comprehensive Spending Review underway, we believe that the time is ripe for the Government to clarify how the sustainable investment rule will operate in the next economic cycle. We therefore recommend that, either in the 2007 Budget or in reporting the outcome of the Comprehensive Spending Review, the Government—

a)  state whether it proposes to interpret the sustainable investment rule over the next economic cycle as requiring that net debt be maintained below 40% of GDP in each and every year of that economic cycle;

b)  set out an analysis of steps it has taken to ensure that the sustainable investment rule does not operate so as to prevent the implementation of appropriate public sector investment projects with positive rates of return; and

c)  clarify its position as to whether possible changes to the measurement of net debt would necessitate changes to the sustainable investment rule.

99   See paragraph 3. Back

100   Pre-Budget Report 2006, Table B8, p 229 Back

101   Budget 2006, Table C4, p 259 Back

102   Pre-Budget Report 2006, Table B8, p 229; Budget 2006, Table C4, p 259 Back

103   Budget 2006, Tables C4 and C5, p 259 Back

104   Pre-Budget Report 2006, Tables B8 and B9, p 229 Back

105   Budget 2006, Table C5, p 259 Back

106   Pre-Budget Report 2006, Table B9, p 229 Back

107   Q 37 Back

108   HC (2005-06) 739, para 61 Back

109   Pre-Budget Report 2006, Table B12, and Box B2, pp 232, 233 Back

110   Q 199 Back

111   Q 31 Back

112   Q 32 Back

113   Q 328 Back

114   Pre-Budget Report 2006, Table B17, p 241 Back

115   Pre-Budget Report 2006, para B.67, p 239 Back

116   Ibid, Table B17, p 241 Back

117   Ibid, Table B8, p 229 Back

118   IFS Public Finance Bulletin, November 2006 Back

119   Ibid, para B.26, p 223 Back

120   Ibid, Table B9, p 229 Back

121   Q 36 Back

122   Ibid Back

123   Q 23 Back

124   Q 24 Back

125   Q 162 Back

126   See paragraphs 36-39. Back

127   Pre-Budget Report 2006, para 2.54, p 30 Back

128   Ibid, para B.7, p 218 Back

129   IFS Press Release, 'Analysis of the Pre-Budget Report', 7 December 2006 Back

130   Morgan Stanley, 'Pre-Budget: Not much of a change', 6 December 2006 Back

131   Pre-Budget Report 2006, Table B9, p 229 Back

132   Budget 2006, Table C5, p 259 Back

133   Q 171 Back

134   HM Treasury, Evidence on the UK Economic Cycle, July 2005, paras 2.36-2.39 Back

135   Audit of Assumptions for the 2005 Pre-Budget Report, Report by the Comptroller and Auditor General, HC (2005-06) 707, 5 December 2005, paras 72-73 Back

136   Q 165 Back

137   Ev 72 Back

138   HM Treasury, Evidence on the UK Economic Cycle, July 2005, para 3.12 Back

139   HC (2005-06) 739, Q 55 Back

140   Ev 70; Pre-Budget Report 2006, Chart A3, p 198 Back

141   Q 28 Back

142   Q 35 Back

143   Q 30 Back

144   Q 164 Back

145   HC (2005-06) 739, paras 43, 45 Back

146   Qq 166-167 Back

147   Qq 319-320 Back

148   IFS Press Release, 'Analysis of the Pre-Budget Report', 7 December 2006 Back

149   Qq 321-322 Back

150   HC (2005-06) 739, para 54 Back

151   Pre-Budget Report 2006, para 2.8, p 15 Back

152   IMF Article IV Report on the United Kingdom, March 2006, para 22 Back

153   Q 35 Back

154   HC (2005-06) 739, para 55 Back

155   Qq 169-170 Back

156   Treasury Committee, Oral and Written evidence, Bank of England February 2005 Inflation Report, HC (2004-05) 500-i, Q 22 Back

157   Pre-Budget Report 2006, para 2.58, p 31 Back

158   Ibid, Table B1, p 218 Back

159   HC (2005-06) 994-I, para 45: Q 38 Back

160   HC (2005-06) 739, para 56 Back

161   Q 41 Back

162   Q 39 Back

163   Q 40 Back

164   IFS Public Finance Bulletin, September 2006, p 2 Back

165   Budget 2006, Table C19, p 278; Pre-Budget Report, Table B24, p 248 Back

166   IFS Public Finance Bulletin, July 2006, p 2 Back

167   Q 51 Back

168   Qq 53, 54 Back

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