Council Opinion of 28 February 2000 on the updated convergence programme for the United Kingdom for the period 1998-1999 to 2004-2005
Date: 2000-02-28
Institutions: Council of the European Union
Subjects: United Kingdom, economic convergence, economic cooperation, economic stabilisation, public finance

6.4.2000

EN

Official Journal of the European Communities

C 98/5

COUNCIL OPINION

of 28 February 2000

on the updated convergence programme for the United Kingdom for the period 1998-1999 to
2004-2005

(2000/C 98/05)

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 coordination of economic
policies (1), and in particular Article 9(3) thereof,

Having regard to the recommendation of the Commission,

After consulting the Economic and Financial Committee,

HAS DELIVERED THIS OPINION:

a government

On 28 February 2000 the Council examined the updated
Convergence programme of
the United Kingdom which
covers the period 1998-1999 to 2004-2005. The programme
surplus of 0,3 % of GDP in
envisages
1999-2000, small surpluses in the two following years to
2001-2002 and small deficits in the years 2002-2003 to
2004-2005. The Council commends the clear presentation of
the convergence programme update that facilitates the analysis
the United Kingdom’s current and prospective macro-
of
economic and fiscal developments. The Council considers it
appropriate that
the securing of
the programme stresses
macro-economic stability supported by a sound budgetary
the
position and continued structural
Council considers that the programme is fully in line with
the Broad Economic Policy Guidelines.

reform. Moreover,

The programme is built upon a macro-economic framework
showing a recovery in GDP growth from 1(cid:190) % in 1999 to
growth close to trend (cid:151) put at 2‰ % (cid:151) thereafter, which
the Council considers to be realistic. Moreover, the projections
in the programme for the public finances are, for reasons of
caution, based on a lower assumption for trend growth (cid:151)
namely 2… % (cid:151) which the Council considers to be appro-
priate.

to inflation and interest

With respect
the United
Kingdom continues to fulfil the convergence criterion with
some margin. The Council notes
the monetary
inflation targeting, with operational responsi-
framework of

rates,

that

bility for interest rate changes given to the Bank of England,
has been an important condition for securing low inflation
expectations. The Council notes that under the current policy
framework,
the United Kingdom
inflation target to be achieved over the programme period; it
further notes that such an outturn is likely to be consistent
with the ECB’s definition of price stability.

the programme projects

The United Kingdom has fulfilled the convergence criterion on
the long-term interest rate for some time. This helps confirm
the credibility given to the United Kingdom’s stability oriented
framework for macro-economic policy. It notes that while there
are signs of reduced exchange rate volatility, it cannot yet be
concluded that this policy framework has delivered a stable
exchange rate. Therefore, as in the opinion on the previous
convergence programme (2), the Council recommends that the
United Kingdom continue with the stability oriented policies
with a view to securing exchange rate stability which, in turn,
should help re-enforce a stable economic environment.

The Council notes with approval, that over the programme
period (cid:151) to 2004-2005 (cid:151) the general government finances
are projected to be close to balance in underlying terms thus
fulfilling the requirements of the Stability and Growth Pact. The
Council nevertheless notes and welcomes
the raising of
government investment as a share of GDP within the expen-
diture totals. It also notes that the move to three-year allo-
cations of departmental expenditure has placed the government
finances on a more stable footing and the mechanism should
help ensure 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 60 % of GDP and is expected
to fall
to 45 % in 1999-2000. The Council welcomes the
envisaged further reduction of the gross debt ratio to below
40 % of GDP by 2004-2005.

It notes, with approval,

The Council welcomes the structural reforms included in the
programme.
the progress on
economic reforms should help provide the flexibility required
to improve the underlying performance of the economy and
ensure that divergences in economic cycles between the United
Kingdom and its European partners are minimised.

that

(1) OJ L 209, 2.8.1997, p. 1.

(2) Council Opinion of 8 February 1999 on the

convergence
the United Kingdom, 1997-1998 to 2003-2004

programme of
(OJ C 68, 11.3.1999, p. 5).