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The public finances going forward

The public finances going forward. Robert Chote, Carl Emmerson, Christine Frayne and Gemma Tetlow Institute for Fiscal Studies. The fiscal rules . 1998 Finance Act Golden rule Sustainable investment rule Are they adequately serving the purpose they are meant to serve?. The golden rule.

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The public finances going forward

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  1. The public finances going forward Robert Chote, Carl Emmerson, Christine Frayne and Gemma Tetlow Institute for Fiscal Studies

  2. The fiscal rules • 1998 Finance Act • Golden rule • Sustainable investment rule • Are they adequately serving the purpose they are meant to serve?

  3. The golden rule • Borrow only to invest • Current budget balance or surplus • Judged over the economic cycle

  4. A changing cycle? Budget 05: 7 year cycle Source: HM Treasury ; Morgan Stanley

  5. A changing cycle? PBR 05 and Budget 06: 12 year cycle Budget 05: 7 year cycle Source: HM Treasury ; Morgan Stanley

  6. A changing cycle? PBR 05 and Budget 06: 12 year cycle Budget 05: 7 year cycle PBR 06: 10 year cycle Source: HM Treasury ; Morgan Stanley

  7. A changing cycle? PBR 05 and Budget 06: 12 year cycle MS filter: 7 year cycle Budget 05: 7 year cycle PBR 06: 10 year cycle Source: HM Treasury ; Morgan Stanley

  8. Current budget balance Financial Year Source: HM Treasury

  9. Current budget balance Financial Year Source: HM Treasury

  10. Current budget balance Financial Year Source: HM Treasury

  11. Current budget balance Financial Year Source: HM Treasury; Morgan Stanley

  12. The sustainable investment rule • Debt at a stable and prudent level • This cycle: ≤40% of national income every year • Undefined over next cycle

  13. Will the investment rule be met? Source: HM Treasury; IFS

  14. Green Budget forecasts • Slightly weaker current budget in the short term, stronger in the medium term • Golden rule to be met over the current cycle • Unchanged sustainable investment rule would be more constraining over the medium term

  15. Receipts forecasts Source: HM Treasury; IFS

  16. Current spending forecasts Source: HM Treasury; IFS

  17. Current budget balance Source: HM Treasury; IFS

  18. Cumulative surplus on the current budget Source: HM Treasury; IFS; Morgan Stanley

  19. Current budget balance Source: HM Treasury; IFS; Morgan Stanley

  20. Will the investment rule be met? Source: HM Treasury; IFS; Morgan Stanley

  21. Budget judgement • Little difference between Green Budget forecasts and Treasury • Golden rule expected to be met over: • current cycle • next cycle of at least 5 years • Unchanged sustainable investment rule would be more constraining • No new tax raising measures necessary unless higher spending is planned over CSR years

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