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MINUTES OF MONETARY POLICY COMMITTEE MEETINGON 5-6 APRIL 2000

1 Before turning to its immediate policy decision, the Committee discussed the Budget; money and asset prices; demand and output; the labour market; prices and costs; the world economy; and other considerations relevant to its decision.

The Budget

2 Prior to its previous meeting, the Committee had been briefed by Treasury officials on the broad shape of the Budget's macroeconomic projections and the prospects for the public finances. It had agreed that more analysis would be needed once the full details of the Budget were known. 3 Since then the Budget had been finalised. The broad shape of the projections for the public finances was unchanged from the Committee's previous meeting. In 1999/2000 the net borrowing figure was nearly 1% of GDP lower than assumed in the November Pre-Budget Report (PBR), with the surplus now put at £11 billion as against £2 billion in November. The net borrowing figures in the Budget for the following two years were also lower than in the PBR, although the difference between the Budget and the PBR numbers was smaller than for 1999/2000. By the third year (2002/2003) net borrowing was higher than in the PBR. 4 The figures for real government consumption and investment over the next two years were higher in the Budget than the assumptions made in the February Inflation Report, but little different from those in the November Inflation Report. This principally reflected the conventions employed in the Committee's forecasts, not announcements in the Budget. Between November and February the government expenditure deflator had been revised up which, when projected forward, had implied lower public spending in real terms given the government's nominal spending plans. The higher nominal profile for public spending in the Budget would need to be reflected in the May Inflation Report, but the February Inflation Report had, in effect, already incorporated much of the recorded increase in tax revenue in 1999/2000, and this had influenced the private sector consumption and investment estimates for 1999/2000.