Andrew Smith, Chief Economist at
KPMG
in the UK has joined a growing chorus criticising chancellor Alistair Darling
for failing to add the Northern Rock’s liabilities to the net debt figure.
‘Next week’s budget will almost certainly see the fiscal rules being bent, if
not outright broken and, or, rewritten,’ Smith said. But including the Northern
Rock liabilities in the public finances’ balance sheet would blow the
government’s ‘sustainable investment’ rule which limits the debt to GDP ratio to
40%.
‘But this may not count as an out and out rule “break”, he said. ‘It is most
likely to be treated as a one-off breach, with figures presented both including
and excluding the “temporary public ownership” of the stricken mortgage bank.’
Smith said forecasters, including the Monetary Policy Committee, now expected
a deeper and longer slowdown than
HM
Treasury anticipated in its pre-budget report. Adopting a weaker forecast,
suggested government finances would not achieve the PBR prediction of returning
to balance by 2009-10 without tax increases or spending cuts.
Further reading:
It is best to plan for the worst
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