I’m embedded at the IFS/Morgan Stanley Green Budget event – at which the two organisations present their own prognoses for the UK economy and public finances – and my head’s swimming with numbers, forecasts and graphs. Two things are standing out, though: just how much uncertainty there is about where we’re headed, and how restricted future governments are going to be because of Brown’s stewardship of the public finances.
First, the uncertainty. As Morgan Stanley’s David Miles put it, there is “an unusally large amount of uncertainty about the UK economy” right now. Even the experts just don’t know what’s coming next, and they’re having to come up with numerous “pessimistic”, “optimistic” and “central” forecasts to account for this. It’s striking that even the central forecasts are generally more pessimistic than the Treasury’s forecasts – although, to be honest, not by all that much – meaning that tax receipts will most likely be lower, borrowing higher, and the recovery slower than HMT expects.
Of course, all this feeds into the fiscal mess that the next government will inherit. Even on the Treasury’s forecasts for the economy – and even with an extended period of fiscal tightening (i.e. tax rises and/or spending cuts) – the IFS reckon that public sector net debt will be around 50 percent of GDP in 2013-14*, and will go only below 40% in 2032-33. But if you go off a more pessimistic forecast for the economy, then the debt-to-GDP ratio may be 90 percent in 2014 – something that the brains here call an “unsustainable” position, and one that would require “huge” tax hikes or spending cuts. Cameron ‘n’ Osborne must be looking on in fear.
Anyway, I’m just grabbing a coffee and some biscuits, and then it’s back to hear a few more presentations. I’ll fire off another dispatch if there’s anything else that grabs me.
*N.B. This doesn’t include Brown’s off balance sheet ruses – the unofficial situation will be considerably worse.
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