Budget margins ‘extremely tight’, warn MPs

The UK Treasury Committee warns in its report on the 2008 Budget that the
Treasury may have provided insufficient margin for error when forecasting
economic growth, given the risks of continued financial market turbulence.

The report notes Treasury’s growth forecasts, used for the latest fiscal
projections, were more optimistic than the average of independent forecasts. It
suggests the margin to meet the sustainable investment rule was extremely tight,
particularly in view of the uncertainty surrounding the overall economic
climate, Tax-news.com reports.

‘Critical to this forecast is the resilience of the UK economy to shocks.
Some of the very things that have kept our economy growing over the last decade
may start to cause us problems, and the 2008 Budget may not have recognised this
fully,’ John McFall, chairman of the committee, said.

‘There are significant downside risks to the economy, and therefore
potentially to tax receipts. As such, the government is going to have to be
extremely vigilant in how it manages the public finances if it wishes to
maintain its so far clean record in meeting its own fiscal rules.’

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