DJ UK Lawmakers: Tsy Consistently Overestimating Revenue
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LONDON (Dow Jones)--The U.K. Treasury has consistently overestimated its revenue forecasts, and should clarify the rules that govern fiscal policy, an influential committee of parliamentarians said in a report Wednesday.
The Treasury Select Committee, a group of 15 members of parliament from all political parties, said in its assessment of last month's Pre-Budget Report that the treasury, headed by Chancellor of the Exchequer Gordon Brown, had overestimated government revenue for the last five years.
"It is important that official forecasts for tax receipts avoid any systemic bias...particularly towards the end of an economic cycle when forecasts are likely to come under particular scrutiny," the committee's report said.
The TSC called for the treasury to assess whether a sharp rise in global oil prices had had a disproportionate effect on U.K. economic growth. In the Pre-Budget report, Brown was forced to admit U.K. economic growth in 2005 would be around 1.75%, way below his previous forecast of 3%-3.5% given last March.
"We recommend the treasury investigate the extent to which the negative effects on growth of higher oil prices were greater in the U.K. than in the other major G7 (Group of Seven leading industrial) economies," the TSC report said.
The TSC said recent changes to the measurement of the government's fiscal "golden rule" - that government current spending shouldn't exceed current borrowing over the economic cycle - had pointed up the rule's limitations as a means of assessing the health of public finances.
"As the final years of the current economic cycle are approached, too much emphasis is placed on immaterial or technical matters rather than the rule being used to assess whether government policy has been broadly appropriate and fair over the medium term," the committee's report said.
The committee also sounded a note of caution about the assessment of the government's second fiscal rule, that its net debt should be less than 40% of total U.K. annual gross domestic product. At present it is unclear whether the rule is meant to be measured over the course of an economic cycle, or year by year. Net debt is expected to be over 28% of GDP by 2008-09.
The TSC said the treasury should clarify this before the end date of the current economic cycle, in fiscal year 2008-09. |
