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THE AUTUMN STATEMENT
Author(s) -
Budd Alan,
Dicks Geoffrey
Publication year - 1985
Publication title -
economic outlook
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 0.1
H-Index - 8
eISSN - 1468-0319
pISSN - 0140-489X
DOI - 10.1111/j.1468-0319.1985.tb00115.x
Subject(s) - treasury , economics , inflation (cosmology) , revenue , asset (computer security) , exchange rate , monetary economics , statement (logic) , econometrics , finance , geography , political science , physics , computer security , archaeology , theoretical physics , computer science , law
The Treasury's forecast, published with the Autumn Statement, has been widely heralded as showing a surprisingly cheerful picture for next year as far as both output and inflation are concerned. In fact it is close to the forecast which we produced in October. Here we compare the two forecasts and then consider how our forecast is affected when we adopt the Treasury assumptions on asset sales and the exchange rate. We find that the Treasury is more optimistic than we are on investment and that holding the exchange rate ‐ which is needed to produce the official inflation forecast ‐ requires rather higher interest rates than we assumed in October and this widens the gap between our forecast for GDP and the Treasury's forecast. We also consider how the government should respond to lower North Sea oil revenues. Taking a permanent income approach, we suggest that the PSBR should be allowed to rise by £2bn on this basis. The same approach, however, suggests that an extra £71/2bn of asset sales should be used to cut the PSBR not taxes. On balance therefore this analysis indicates that next year's PSBR target should be lowered by £1/2bn from the £71/2 bn contained in the 1985 MTFS.