Professor John McHale:

That is a very good and difficult question. At the moment, as I said earlier on, we think there is a probably relatively small but shrinking shortfall relative to the potential of the economy. If we did not have any other constraints, it would be appropriate to have a more expansionary policy. Unfortunately, we do have additional constraints, including the very high debt level and the fact that we still have a deficit and are continuing to borrow. We need to get that debt onto a downward path. Balancing the different factors together - the need for cyclical stimulus is now reducing but we still have these issues with the high debt level - we think that a policy that is broadly in compliance with the fiscal framework would be appropriate. I would not exaggerate the effect of the somewhat larger expansionary package the Government is planning from a purely substantive economics point of view. However, one concern is that if one begins to disregard the framework at this very early stage, and we are not that long out of the crisis, there is a question of whether the institutional framework really will be strong enough to prevent us from making the kind of mistakes we have seen before. We would, therefore, like to see the framework being respected.