Economy: Effect of US “Fiscal Cliff” Solution

Lord Eatwell Excerpts

Tuesday 8th January 2013 Lords Chamber

[Lord Newby]

My Lords, I completely agree with the noble Baroness. That is why the Prime Minister has set promoting a US/EU trade agreement as one of his top priorities for the G8, as well as moving forward on other trade agreements, such as that with Canada, which are already a long way down the pipeline.

[Lord Eatwell]

My Lords, will the noble Lord consider answering the Question asked by my noble friend Lord Barnett? He asked what the assessment was of the impact of the fiscal cliff solution on the UK economy. As the noble Lord said, this had led to a 1.7% increase in the fiscal burden on GDP, and the debt ceiling debates in seven weeks’ time referred to by the noble Baroness, Lady Kramer, may add further burdens to the US economy. Is this good or bad for Britain?

[Lord Newby]

Whether it is good or bad for Britain, it is what is happening in the US. What I said in my original Answer was that the estimates, which were published by the ONS at the time of the Autumn Statement, were based on an assessment of what was likely to happen, which is exactly what has happened. The Bill passed last week is having an impact of 1.7% on US GDP. The ONS assumed that the Bill passed last week would have an impact of about 1.7% on US GDP. We factored that into our calculations and the growth forecast produced for this year will be unchanged because what has actually happened is what we thought was going to happen.