» Monday, June 6, 2011


Asked whether the Chancellor’s comments this morning on being on course for meeting his fiscal mandate a year early were significant, the PMS replied that this was what the Chancellor had said at the time of the Budget. The PMS said that based on the OBR forecasts, the plans that had been set out meant that we would meet our fiscal mandate a year early.

Asked if meeting that fiscal mandate a year early having initially set it for 2015 meant that the Government had the chance to vary the pace, the PMS replied that the Chancellor had been saying that there was caution built into those plans. Whenever the Government set policy for future years, there were uncertainties and therefore it was right to take a cautious approach.

The PMS added that the Chancellor had spoken about flexibility through the operation of the automatic stabilisers. The Government set its fiscal mandate in terms of structural deficits and that allowed the automatic stabilisers to work if they needed to.

Put that this could be seen as a different version of Plan A’ the PMS replied that he did not accept that. If people looked at the detail of previous statements, the Chancellor had always made clear that we were setting policy to meet that fiscal mandate.

On whether the fiscal mandate could be met even earlier if things went better than expected, the PMS said that there were uncertainties when the OBR projected the economy for a period of five years. Policy needed to be made with those uncertainties in mind and it made sense to take a cautious approach to ensure fiscal targets were met.

Asked if that course of action had even more merit today, the PMS said that the Chancellor was being interviewed this morning in the context of remarks made by some economists about whether or not policy should change and he had been clear on his answer to that.

The PMS added that this was also in the context of some economic data that showed that the recovery was pretty choppy. If people looked at what was happening in the US and the eurozone, there were considerable uncertainties out there about the economic outlook. The Government had concluded that this should not mean a change of strategy.

Put that there seemed to be an official plan presented to Parliament to eliminate the structural deficit by 2015 and an informal target which was to do this a year early, the PMS said that he did not think it was an informal target; as a result of the decisions that had been taken and the forecasts of the OBR we expected to meet the mandate a year early.

The PMS said that when setting fiscal policy, it had to be set on the basis of economic forecasts. Fiscal policies were set over a number of years and there were considerable uncertainties in year four or five for example. So it was very difficult to say with absolute certainty what would be the level of receipts generated by taxes in five years time. The PMS added that because of this, it was right to take this cautious approach.

Put that the Chancellor was not lashing himself to the mast of 2014′, the PMS replied that the Chancellor was repeating the position that he set out very clearly at the time of the Budget.

The PMS said that we had set out some tax policies and some spending polices, we had a fiscal mandate which was to eliminate the structural deficit in five years. As a result of the policy decisions the Government had taken and the OBR’s independent forecast of the economy we expected to meet that mandate a year early that meant that there was caution built into the plans.

Asked what would happen if the OBR forecasts changed, the PMS said that that those forecasts were a matter for the OBR.

original source.

Briefing took place at 10:00 | Search for related news

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