Chancellor Gordon Brown says he will meet both of his key guiding rules on fiscal spending and investment through the next few years of the economic cycle, while ongoing investment should see its burden as a proportion of national income continue to fall.
The UK economy is on track to achieve growth of between 2%-2.5% in 2006-7, in line with predictions made in the Pre-Budget Report, Brown says, forecast to rise to between 2.75%-3.25% in 2007-8.
Domestic demand is set to rise from 2%-2.5% to 2.75%-3.25% by fiscal 07-08, while exports should see growth of between 5%-5.25% by that year.
UK economic growth has averaged 2.8% since 1997, among the fastest in the G7 alongside the US and Canada, and higher than the 2.1% average seen in 1979-1997, Brown says.
UK national income per head puts the country in second place out of the seven member states of the G7.
These figures help explain why the Treasury should hit its golden rule target and investment rule target over the next few tax year.
The forecast in spending is forecast as a deficit of £7bn in 2006-7, a deficit of £11bn in 2007-8, before turning to a surplus of £1bn, £7bn and £10bn between 2008-2011. This gives a net positive margin of £16bn Brown says, compared with a deficit of £157bn generated in the last economic cycle of 1986-1997.
The rule on only spending to invest over the economic cycle- the investment rule - will see UK government net debt hit 36.4% this fiscal year, rising to 37%, 38%, 38% and 38%. Brown contrasts this with current net debt levels of between 47% to 100% in other G7 countries.
The limits on net debt accrual means the Treasury will meet its investment rule by a margin of £26bn over the economic cycle, Brown says.
The burden of debt will decreast to 1.5% by 2010-2011.IFAonline
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