Budget 2006 Economics - The Outlook: Ray Barrell

Publication date: 23 Mar 2006 | Publication type: Press and broadcast | Theme: Macroeconomics | NIESR Author(s): Barrell, R

BUDGET 2006 ECONOMICS - THE OUTLOOK: Ray Barrell<br />

Financial Times<br />

Published: Mar 23, 2006 <br />

<br />

Ray Barrell<br />

<br />

The Budget showed the usual degree of caution and optimism. The chancellor is optimistic about prospects for growth in 2006 and 2007, and hence more optimistic about prospects for tax revenues than we are at NIESR. He is also cautious about plans for public sector pay increases to be limited to just above the rate of inflation. Current spending is projected to fall by 0.5 per cent of gross domestic product over the next five years. Despite this, projections for the current surplus have been revised down for this year and next. If his optimism and caution are justified, and the economic cycle lasts a further three years, the golden rule will be met with some space to spare. NIESR's projections are that the cycle will end rather earlier and the cumulated current budget deficit would still be significant, indicating the need for further tax rises. Our record on forecasting growth and budget deficits has been better than that of the Treasury, especially over the past four years.<br />

<br />

© Copyright The Financial Times Ltd<br />

<br />

Research programmes