Govt has underestimated “continuing risks” to economy


The government has underestimated the continuing risks of financial market turbulence in its growth predictions, the Treasury Committee has claimed.

It said the Treasury’s growth forecasts used for the latest fiscal projections are more optimistic than the average of independent forecasts.

John McFall, chairman, noted the Treasury had been "optimistic" with its forecasts and warned it was "going to have to be extremely vigilant in how it manages the public finances if it wishes to maintain its so far clean record in meeting its own fiscal rules".

The Bank of England’s monetary policy committee will meet later this week to decide whether to cut interest rates, or leave them unchanged at 5.25 per cent.

A reduction, if passed on by lenders, could reduce the cost of finance and possibly stimulate further investment in commercial property.

The committee’s review of economic and fiscal prospects also warned the government has ignored the tax implications on middle and low-income non-domicile workers and expressed concern over the poor take-up rate of working tax credit among eligible families.