Professor Philip Lane:

Let me emphasise that it is going to go in the other direction. In a discussion where we say the underlying true level of income in the economy is given by a number like GNI*, all of the fiscal numbers are going to look worse, so the amount of fiscal space, if one uses similar principles, will be less. It is a separate debate. Of course, there is an ongoing European debate about the current fiscal rules and the advisability or otherwise of including public investment in the calculations. No one is saying the European fiscal rules tell one what a country should be doing. In 2010 I was the rapporteur to a predecessor to this committee and we discussed the important role of a parliamentary budget office, an independent fiscal council and so on. It is very important that we understand that where those rules matter, we should discuss them but more important than that is thinking about what is the best for the country. We should be trying to think about fiscal numbers relative to GDP and when GDP is so inflated, we should also be saying, "Hold on a second, compared to GNI* what do the numbers look like?", even though it is going to paint a less flattering picture.