Mr. John McCarthy:

The 2012 figures on the budgetary side are still very much work in progress but I stress that over the long run one can reasonably model nominal GDP growth as opposed to the real figure. For example, taxation revenue will move one for one with nominal GDP growth over the long run. In other words the elasticity is essentially unity. In the short term, however, there can be massive deviations around the long-run trend. There can be very high elasticity and stronger tax growth in spite of the weak GDP growth that occurs for various reasons, for example, it can happen if a small number of firms in the multinational sector are doing well. It is not just the nominal GDP figure that will feed in to the deficit target. One needs to take into account elasticities and the 101 other moving parts that will feed into it.