HMT projects landfill tax revenues to reach £1.6 billion

The Treasury has published projections for landfill tax revenues through to 2015/16. They expect these to remain fairly flat for the next couple of years before rebounding strongly. This is presumably as they expect a strong post-recession rebound in output as the economy tries to catch up back to its long run trend rate of growth, and expect this to lead to an increase in total volumes of waste.

Notwithstanding the fact that any form of economic forecasting is essentially complete guesswork, I personally don't think we will see this strong rebound effect in output in the next few years. I think that through the boom we experienced an overallocation of resoures towards certain sectors, such as housing, and that the current correction will lead to a permanent loss of output. This is because I tend to think that the economy will follow a "random walk with drift" model, rather than a "trend growth" model.

The implications for the economy are that we are unlikely to witness a strong period of catch-up growth as we come out of the recession, and the implications for landfill tax revenues are that they probably won't reach the peaks predicted by the Treasury.