Publications
Fiscal rules OK?
| Author: | Alasdair Murray |
| Date of Publication: | January 2009 |
Neither the Government’s fiscal rules nor the Conservatives’ committee of budget experts will help Britain out of its debt crisis, a new report from liberal think tank CentreForum, argues.
The report argues that Parliament needs to reassert its control over fiscal policy. In recent years, UK politicians have sought to offer technical solutions to what is fundamentally a political problem. First came Gordon Brown’s fiscal rules; then David Cameron’s Office for Budget Responsibility. But such innovations simply blur responsibility for bringing the UK back to solvency, the authors argue.
Labour spent much of the last ten years claiming the fiscal rules would prevent a return to ‘boom and bust’. But the authors argue that they did no such thing. Rather, they succeeded only in obscuring the political choices that Gordon Brown was making every step of the way. Despite his talk of ‘prudence’, he was actually engaging in an old-fashioned public spending splurge that led to today’s structural budget deficit. That he was able to do so without breaking his rules shows how little they restrained the government in practice.
Now the Conservatives have proposed an ‘Office for Budget Responsibility’ – a new institution designed to keep the government on the straight and narrow. But CentreForum argues this merely replaces one technical solution with another, and will confuse both markets and voters about where fiscal responsibility lies.
Commenting, Giles Wilkes said:
“It is partly a result of the failed fiscal rules that the next Chancellor will face the worst budgetary outlook since the Second World War. Tough decisions on fiscal policy can only be made in Parliament."
"Ultimately, it is the voters and the markets that punish fiscal irresponsibility, not some council of wise men. Any new institution will succeed only in applying a thin veneer of technocratic objectivity to an inherently political process. The Tories should remember how Kenneth Clarke put Britain on the path to fiscal solvency in the 1990s – by speaking clearly and plainly at the dispatch box about his priorities, leaving no one in any doubt about where responsibility lay”.