| The nonsensical fiscal rules 08:41 - Mar 6 with 577 views | DJR |
I've mentioned on here before my scepticism about the fiscal rules which both parties are wedded to and which only require national debt to be falling in the fifth year, but on a rolling basis.
It is this rule which on current forecasts will give Hunt the headroom of £13 billion to help make tax cuts. But as the following article indicates such forecasts are very inaccurate rendering the fiscal rules, in my view, rather illusory.
https://news.sky.com/story/how-very-inaccurate-forecasts-determine-the-amount-sp
This from the article explains things.
"Right now that "headroom" is £13bn. But national debt figures move about rather a lot, as do GDP figures.
A sudden economic shock can send the debt load soaring higher, as can a rise in interest rates. And forecasting anything five years hence is tremendously difficult.
So these very numbers - the ones upon which everything else depends - are, to put it lightly, quite volatile.
That brings us back to the question we started with - about how accurate those forecasts turned out to be in the past. The answer is: very, very inaccurate.
The average forecasting error over the past two decades - in other words, the difference between the projection for the national debt five years hence and what actually happened - was just over 15% of GDP.
Let's put that into context. It's about £415bn. That is more than double the NHS budget; it's four HS2s (the whole thing, not just the London to Birmingham rump); it's nearly 70 aircraft carriers (we currently have two).
No one thinks you should pay all that much attention to forecasts of government debt five years hence. They are a useful signpost of fiscal policy, but hardly a biblical truth.
Yet since Chancellor Jeremy Hunt has said he'll do everything to avoid breaking his rules, the budget will end up paying a staggering amount of attention to the difference between these two highly unreliable numbers." |  | | |  |
| The nonsensical fiscal rules on 09:36 - Mar 6 with 499 views | SuperKieranMcKenna |
The other elephant in the room which they are avoiding mention of is inflation. Given they told us public service pay rises would lead to cyclical inflation, how can they justify tax cuts. Inflation is still proving sticky, and real terms prices rises were thought to be around 19pc last year - much higher than the CPI measurement. Inflation is also still running much higher in the UK than the EU, although it’s now been driven by services rather than commodities.
The opinions of the Fed and BoE are far more bearish on any rate reductions in the near future as inflation is proving so difficult to tame. 55pc of uk importers have also been affected by the attacks and re-routing in the Red Sea, so this will also have an impact on the cost of goods. Point being, if they are so financially responsible, why are they offering tax cuts when inflation is still running hot. Given infrastructure in particular has been hit by inflationary cost increases we’ll need to spend more on public service just to provide the same (underfunded) levels as now. |  | | |
| The nonsensical fiscal rules on 10:13 - Mar 6 with 452 views | DJR |
| The nonsensical fiscal rules on 09:36 - Mar 6 by SuperKieranMcKenna |
The other elephant in the room which they are avoiding mention of is inflation. Given they told us public service pay rises would lead to cyclical inflation, how can they justify tax cuts. Inflation is still proving sticky, and real terms prices rises were thought to be around 19pc last year - much higher than the CPI measurement. Inflation is also still running much higher in the UK than the EU, although it’s now been driven by services rather than commodities.
The opinions of the Fed and BoE are far more bearish on any rate reductions in the near future as inflation is proving so difficult to tame. 55pc of uk importers have also been affected by the attacks and re-routing in the Red Sea, so this will also have an impact on the cost of goods. Point being, if they are so financially responsible, why are they offering tax cuts when inflation is still running hot. Given infrastructure in particular has been hit by inflationary cost increases we’ll need to spend more on public service just to provide the same (underfunded) levels as now. |
And prices on the forecourt are feeding through already as the RAC reported that February saw the biggest leap in fuel prices in five months, with petrol jumping 4p-a-litre and diesel by almost 5p, | | | |
| The nonsensical fiscal rules on 10:41 - Mar 6 with 405 views | SuperKieranMcKenna |
| The nonsensical fiscal rules on 10:13 - Mar 6 by DJR |
And prices on the forecourt are feeding through already as the RAC reported that February saw the biggest leap in fuel prices in five months, with petrol jumping 4p-a-litre and diesel by almost 5p, |
Brent crude is only trading at $82, so must assume either increased supply chain costs, or price gouging. | | | |
| The nonsensical fiscal rules on 15:23 - Mar 6 with 312 views | DJR |
Post transferred to wealth tax thread. [Post edited 6 Mar 15:28]
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