How do you set fiscal policy? The aim is not to allow government debt to get too large relative to GDP. One obvious way is for the government to plan its expenditure over the next year or two (or beyond) and then set taxes so that projected revenues are close to expenditure.
The key problem with this is the difficulty of making projections. Projecting expenditure is fairly straightforward because it can be managed by government departments under direction from the treasury. But projecting tax revenues is a different matter. First, it requires forecasting the future path of the economy. (This is not too difficult over a stable period like the early 2000s, and indeed the treasury had a reasonable record in those years.) Second, it is necessary to calculate actual tax revenues given the predicted state of the economy. In practice, despite the fact that all tax rates are known,
Sara_Godfrey
bit baffled by all this. I purchased this magazine for my mum as an intellectual lefyt-wing magazine and your articles are poor, lack critical depth and totally support the coallition. And the collotion is run by a bunch of jokers.