COUNCIL OPINION of 8 February 1999 on the convergence programme of the United Kingdom, 1997-1998 to 2003-2004
11. 3. 1999 EN Official Journal of the European Communities C 68/5 COUNCIL OPINION of 8 February 1999 on the convergence programme of the United Kingdom, 1997Ü1998 to 2003Ü2004 (1999/C 68/04) THE COUNCIL OF THE EUROPEAN UNION, Having regard to the Treaty establishing the European Community, Having regard to Council Regulation (EC) No 1466/97 of 7 July 1997 on the strengthening of the surveillance of budgetary positions and the surveillance and coordiÜ nation of economic policiesØ(˛), and in particular Article 9(1) and (2) thereof, Having Commission, regard to the recommendation of the After consulting the Economic and Financial Committee, HAS DELIVERED THIS OPINION: On 8 February 1999 the Council examined the United Kingdom’s Convergence programme which covers the period 1997Ü1998 to 2003Ü2004. The programme envisages a government surplus of 0,8Ø% of GDP in 1998Ü1999 and public finances close to balance in the remaining years of the programme. The Council considers it appropriate that the programme emphasises the securing of macro economic stability supported by budgetary consolidation and continued structural reform. Moreover, the Council considers that the programme is fully in line with the Broad Economic Policy Guidelines. The programme is built upon a macroeconomic forecast showing a deceleration in the strong domestic demand led growth of recent years towards real GDP growth of to recover to 1ÜØ% 1 subsequently in 2001 and remain to 3óØ% around trend thereafter. The Council acknowledges that the growth scenario appears realistic and notes that growth at the top end of the forecast range is based, inter alia, on the success of the government’s labour in 1999 but to 2ú for growth (˛) OJ L 209, 2. 8. 1997, p. 1. rate of unemployment. Moreover, market policies and the delivery of a reduction in the the sustainable projections in the programme for the public finances are, for reasons of caution, based on the lower end of the growth range. The Council notes the government’s commitment to a framework in which monetary policy is applied promptly, with the support of budgetary policy, with a view to achieving a less volatile growth profile. With respect to inflation, the United Kingdom continues to fulfil the convergence criterion with some margin. The Council notes that the monetary framework of inflation targeting, with operational responsibility for interest rate changes given to the Bank of England, has been an important condition for securing low inflation expecÜ tations. The outlook is for inflation to remain low with downward pressure on domestically generated inflation in the near term. The Council urges that the United the Kingdom’s programme period; it is encouraged that such an outturn is likely to be consistent with the ECB’s definition of price stability. target be achieved over inflation stability oriented it The United Kingdom has fulfilled the convergence criterion on the long term interest rate for some time. This emphasises the credibility given by markets to the for framework United Kingdom’s macroeconomic policy. However, is too soon to conclude that this policy framework has, as yet, reduced exchange the Council recommends that the United Kingdom continue with these policies with a view to securing exchange rate stability which, in turn, should help re enforce a stable economic environment. volatility. Therefore rate The Council takes note of the programme’s budgetary objectives and its expectation of their achievement over the programme period to 2003Ü2004. It notes with approval that the public finances are projected to be close to balance in underlying terms over the programme period thus fulfilling the medium term requirements of the Stability and Growth Pact. This budgetary objective is intended to be achieved by announced tax policies that will raise the ratio of receipts to GDP a little over the programme period, while maintaining a ratio below that of the the European Union on average, and by adherence to the firm expenditure plans over the medium term. The Council welcomes the raising of government investment as a share of GDP within the expenditure totals. It also notes that the move to three year alloÜ cations of departmental expenditure should help ensure C 68/6 EN Official Journal of the European Communities 11. 3. 1999 that the tight budgetary position is locked in over the economic cycle. The Council notes that the Government gross debt ratio in the United Kingdom remains below 60Ø% of GDP and is expected to fall below 50Ø% in 1998Ü1999. The Council welcomes the envisaged further reduction of the gross debt ratio to around 40Ø% of GDP by 2003Ü2004. The Council welcomes the structural reforms included in the programme. It notes, with approval, the programme’s emphasis of these reforms, together with the macroÜ economic reforms and the reforms to the public finances. In particular the labour market reforms should build on earlier reforms which have secured an unemployment rate in the United Kingdom well below the European Union average