The government’s Medium Term Financial Strategy (MTFS), the control of expenditure and the scope for tax cuts are all conditional upon the economic environment. Economic growth, the path of inflation and developments in the oil and foreign exchange markets can have a profound effect on the government’s neat arithmetic. Their sums are based upon the economic assumptions underlying the White Paper expenditure projections and the revised assumptions at the time of the Budget which guide the revenue projections. To analyse the robustness of the government’s economic strategy, the Treasury Model has been used to produce a forecast, based on later economic data than was available to the authorities at the time of the White Paper and the Financial Statement and Budget Report (FSBR) and on our economic assumptions. Our forecast also goes out until 1987–88, a little longer than the Treasury’s 1½ years.
KeywordsIncome Defend Toll Lost OPEC
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