Monday October 15, 06:04 PM
UK economists slam Darling's pre-budget forecasts at parliamentary hearing
LONDON (Thomson Financial) - UK economists today slammed some of the forecasts in Chancellor of the Exchequer Alistair Darling's pre budget speech last week as too optimistic.
Appearing before the Treasury Select Committee, Robert Chote of the think-tank IFS said projections for the current budget surplus are over optimistic but that the projection for corporate tax receipts are very hard to determine.
Meanwhile, Martin Weale of the National Institute of Economic and Social Research was not in full agreement on the latter. He believes Darling's estimate for corporate tax revenue is optimistic. Separately he also said the GDP estimate for 2009 was about 0.5 points higher than it ought to be.
Turning to the Golden rule -- which states that, on average over the economic cycle, the government should borrow only to invest and not to fund current expenditure -- Weale said the parameters of the self imposed rule are specific to the Treasury and therefore not very clear. Looking at the rule from what he considers to be a standard interpretation, Weale expects the rule to be breached.
He also said he expects the housing market to continue to slow and that the risk of a sharper correction remains.
Bridget Rosewell of Volterra Consulting said the Treasury's estimate for business investment is perfectly reasonable.
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