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mpc: 2 5 There were, as always, uncertainties in the projections of future government revenue and spending, and in assessing the effects of the Budget more generally. The sustained real growth in public spending on goods and services meant that private spending would have to be constrained. However, spending by departments might increase more slowly than projected, as it had done recently, and tax revenues might continue to be above the levels projected by the Treasury, particularly if their past buoyancy reflected structural rather than cyclical factors. But since the reasons for higher tax revenues were not well understood, it was uncertain how far recent trends could safely be extrapolated into the future. It was noted, though, that the Treasury's Budget projections were prepared using what seemed to be prudent assumptions. All in all, most members of the Committee thought that the impact on future activity and inflation from the Budget seemed unlikely to be large over the next two years. 6 The Committee then discussed the effect on the public finances of the spectrum auctions for the Third Generation mobile telephone licences. While the auction receipts would boost the government's cash flow straightaway, the immediate impact on the Public Sector Net Borrowing measure would be much less marked, since for these purposes the revenue would be accrued over the life of the licences, ie until December 2021. On balance, even though the proceeds were likely to be substantially higher than initially expected the macroeconomic effect should not be large, unless any adjustment in taxes or government spending were brought forward rather than accrued over the life of the licences. More immediately, if foreign bidders bought rather than borrowed sterling to pay for the licences there could be a temporary effect on the exchange rate.

Money and asset prices

7 M0 and M4 lending were both increasing at 8%-9% a year, consistent with robust consumption growth. Loan approvals for house purchase had bounced back strongly in February, suggesting that the slowdown around the turn of the year had reflected seasonal effects. Competition in the mortgage market remained intense. House price indicators in March were mixed, with the Halifax index declining while the Nationwide index had risen strongly. Data on site visits and net reservations from the House Builders' Federation pointed to a possible easing in activity later in the year, but it was too early to say whether house price increases would moderate to the extent projected in the February Inflation Report.