LONDON: British think tank the Institute for Fiscal Studies says the government's Debt Management Office should issue more gilts, taking advantage of lowest real interest rates and the increased demand for the same.
In its annual Green Budget, the institute said, "The likelihood that long-term real interest rates will rise suggests the DMO should lock in low real rates of interest now. Higher issuance of long-dated index-linked debt could also support cost-effective wider pension provision."
In a damning overview of the financial policies followed by the treasury, the institute said the government's ability to borrow in the years to come is rather limited whatever the interest rates. It expects the net debt to be around 39.3 per cent of the national income in 2008-2009.
The institute said chancellor Gordon Brown will break most of the golden rules he himself laid down while managing the finances of the country, including raising taxes and of balancing only for investment and not for current spending.
A spokesperson for the chancellor rebutted the contention of the institute saying the government's spending plans are fully affordable on the basis of cautious assumptions and decisions made.
The release of the Green Budget coincided with the release of official figures, indicating the growth in 2005 at the lowest since 1992. The Office for National Statistics said preliminary figures for 2005 showed that GDP growth was 1.8 per cent, much below Brown's pre-election budget estimate of between 3 and 3.5 per cent, but marginally ahead of his revised forecast of 1.75 per cent in pre-budget report.
The treasury contested the institute's claims and pointed to a U.N. report, which showed Britain at the top of the global table for foreign investment for the first time for 30 years.
The Green Budget, jointly prepared by the institute and Morgan Stanley analyses the issues facing the chancellor ahead of the annual budget in March.
Posted
on : Fri, 27 Jan 2006 02:15 GMT | Investments News
By : Mark Richardson
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