Two documents published today with a different slant
Fiscal sustainability report from Office of Budget Responsibility
“The Office for Budget Responsibility (OBR) was created in 2010 to provide independent and authoritative analysis of the UK’s public finances. As part of this role, the Budget Responsibility and National Audit Act 2011 requires us to produce “an analysis of the sustainability of the public finances” once a year. This Fiscal sustainability report is our first such analysis.
Our approach here is twofold. First, we look at the fiscal impact of past public sector activity, as reflected in the assets and liabilities that the public sector has accumulated on its balance sheet. Second, we look at the potential impact of future public sector activity, by examining how spending and revenues may evolve over the next 50 years – and the impact this would have on public sector assets and liabilities. Broadly speaking, the fiscal position is unsustainable if the public sector is on course to absorb an ever-growing share of national income simply to pay the interest on its debts. This notion of sustainability can be quantified in a number of ways.
The analysis set out in this report builds on provisional work published by the interim OBR in June 2010 and on earlier analyses published by HM Treasury in its Long-term public finance reports from 2002 to 2009. We have also benefited from responses to our March 2011 discussion paper What should we include in the fiscal sustainability report
Fiscal sustainability is a wide-ranging issue and we cannot hope to cover every dimension in depth in a single report. In this first report we set out our analytical framework and identify a range of relevant issues that can be addressed within it.
We examine some of these issues in detail, while a full exposition of others will have to wait for future reports. We would welcome feedback both on the framework we have set out and on the issues that readers feel would merit different or more detailed exploration. This can be sent to OBRfeedback@obr.gsi.gov.uk.
It is important to emphasise that the long-term outlook for public spending and revenues is subject to huge uncertainties. Even backward-looking balance sheet measures are clouded by difficulties of definition and measurement. The long term figures presented here should be seen as broad brush illustrative projections rather than precise forecasts. Policymakers need to be aware of these uncertainties, but should not use them as an excuse for ignoring the long-term challenges that lie ahead.”
http://budgetresponsibility.independent.gov.uk/wordpress/docs/FSR2011.pdfSharper Axes, Lower Taxes
A second more polemic but nevertheless challenging report is that of the Institute of Economic Affairs which challenges the level and composition of public expenditure and the need for a supporting level of revenue through taxation.
http://www.iea.org.uk/publications/research/sharper-axes-lower-taxeshttp://www.iea.org.uk/sites/default/files/publications/files/IEA%20Sharper%20Axes%20web.pdfI wonder whether this report was published just before the OBR report but on the same day deliberately, or it was just a coincidence?
