Today Alistair Darling will announce the death of Gordon Brown's much trumpeted economic fiscal rules.
Brown had said in June 1998 that, under the guidelines of its ‘Code for Fiscal Stability’, it would keep to two strict fiscal ‘rules’. These were the golden rule - over the economic cycle, the government would borrow only to invest and not to fund current spending; and the sustainable investment rule - over the economic cycle, the ratio of net public sector debt to GDP would be set at a "stable and prudent" level (remember prudent? Brown doesn't), defined by the Chancellor as no more than 40 percent of GDP. Since coming to office in May 1997, the government consistently stated that it would adhere to these ‘rules’ which it said were designed to “help to achieve the central economic objective of high and stable levels of growth and employment.”
For years economists have been sceptical about whether Brown met his rules accusing him of shifting the goal posts by playing with the dates of the economic cycle. Nonetheless, on the face of it they were being adhered to.
But now with Darling about to signal the death of the fiscal rules, the Chancellor will also be signalling the death of the government’s economic credibility!
Brown had said in June 1998 that, under the guidelines of its ‘Code for Fiscal Stability’, it would keep to two strict fiscal ‘rules’. These were the golden rule - over the economic cycle, the government would borrow only to invest and not to fund current spending; and the sustainable investment rule - over the economic cycle, the ratio of net public sector debt to GDP would be set at a "stable and prudent" level (remember prudent? Brown doesn't), defined by the Chancellor as no more than 40 percent of GDP. Since coming to office in May 1997, the government consistently stated that it would adhere to these ‘rules’ which it said were designed to “help to achieve the central economic objective of high and stable levels of growth and employment.”
For years economists have been sceptical about whether Brown met his rules accusing him of shifting the goal posts by playing with the dates of the economic cycle. Nonetheless, on the face of it they were being adhered to.
But now with Darling about to signal the death of the fiscal rules, the Chancellor will also be signalling the death of the government’s economic credibility!
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