HIGH inflation is not a cure for Britain’s deficit woes, according to Robert Chote, the chairman of the office for Budget Responsibility (OBR).
In an interview with the Financial Times, he also gave his opinion that cutting petrol duties to counteract soaring fuel prices would make public finances “less stable rather than more stable”.
Many believe higher inflation boosts the public finances by increasing tax revenues. However Chote poured cold water on the idea of fast-rising inflation automatically cutting the deficit.
“There are numerous ways inflation can affect the public finances, some positive and some negative, so we cannot say for sure whether higher inflation lowers or raises the projected deficit,” he said.
Chote, who recently moved to the new role from his former job as director of the Institute for Fiscal Studies, said the OBR plans to start giving monthly updates on public finances.
The body is now preparing the economic forecast for the Budget.