It's not been a good week for fiscal rules.
Jeremy Hunt has been mocked for his addiction to them.
Everyone realises Labour has no chance at all of complying with its version of a fiscal rule (they are all made up to suit the user).
The Institute for Fiscal Studies slayed Hunt's supposed compliance with his rule.
The Office for Budget Responsibility's reputation is in tatters because it is pretending they are real.
So, might it just be that at some point the message will get through to the tiny number of people in the country who pretend simultaneously that a) they know what they are and b) they are useful, that it really is time that they stopped making complete fools of themselves and started talking about economic reality rather than this world of make believe economics?
We can live in hope.
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An absolute priority, surely?
The Institute for Government says that “Fiscal rules are restrictions on fiscal policy set by the government to constrain its own decisions on spending and taxes”. i.e. they are made up. https://www.instituteforgovernment.org.uk/explainer/current-fiscal-rules
They also have a list of “Fiscal rules in the UK since 1997”, https://www.instituteforgovernment.org.uk/explainer/fiscal-rules-history
The Times says that “Absurd fiscal rules are crippling our economy”, https://www.thetimes.co.uk/article/absurd-fiscal-rules-crippling-our-economy-5b7p8tqtv
“The Guardian view on Treasury fiscal rules: no way to run a country”, https://www.theguardian.com/commentisfree/2024/mar/04/the-guardian-view-on-treasury-fiscal-rules-no-way-to-run-a-country
The Guardian also says “The first step to our economic liberation is to tear up these crippling fiscal rules”, https://www.theguardian.com/commentisfree/2024/feb/18/first-step-to-economic-liberation-is-to-tear-up-these-fiscal-rules-will-hutton
The Institute for Fiscal Studies says that “Gaming fiscal rules is no way to make budget policy”, https://ifs.org.uk/articles/gaming-fiscal-rules-no-way-make-budget-policy
Civil Service News writes that the “Government’s ‘fiscal rules’ aren’t working and must be reformed, IfG warns”, https://www.civilserviceworld.com/professions/article/governments-fiscal-rules-arent-working-and-must-be-reformed-ifg-warns
I wonder whether Labour reads the papers?
Thanks for assembling that list
Since money is primarily a means for enhancing the certainty of promises “fiscal rules” are merely a means for hindering their deployment.
Fiscal rules have a certain magical quality about them:
First you decide what you want to do, however unpopular it may be.
Then you make up a rule that says you have to do it.
Then you convince everyone that you regret having to do it but if you do not follow the rule the world as we know it will come to an end.
Finally you do it meanwhile congratulating yourself on being one who has the courage to make difficult decisions.
Yes, fiscal rules are self-serving as well as self-imposed. But it seems to me that so-called fiscal rules are also intended to give an impression that the government has a greater degree of control of the country’s destiny. That the self-imposed rule will somehow determine how the ship of state makes its progress rather than it being blown hither and yon by the winds of fortune (viruses, invasions, floods, etc.). But that assumes that the levers of power are connected to some machinery that will respond, whereas oftentimes the levers just change the signals, with the hope that someone is paying attention and will change their behaviour as a consequence, which may lead to a desired outcome.
It comes from the same place as intense ministerial focus on how much they are spending (or even on what the budget is, not how much is actually spent and on what) and not on the results achieved, or the idea that passing a law criminalising something will by itself stop that thing happening (rather than simply dealing with the consequences, and ignoring the need for effective systems of enforcement).
How long is this government going to limp on, hoping that something turns up to make their election result less dire? Will they wait until after the US election hoping for a Trumpian “anti-woke” wave of support? Many things can happen, many of them bad. Charles and Catherine are poorly. Russia could launch a new offensive and win the war in Ukraine. Hundreds of thousands could starve in Gaza. China could invade Taiwan. Antarctic ice sheets could collapse.
It is time again for “You have sat too long for any good you have been doing lately. In the name of God, go!”
Agreed
One of Labour’s ironclad fiscal rules is that current spending should be covered by taxes. This has been achieved twice in the last thirty years: 1998-99 to 2001-2002 (early on in the New Labour government, when there was a full surplus for three of these four years) and 2018-19 (the end of May’s premiership and the last full year before we left the EU and the pandemic started). Labour might claim that this shows it can be done, so it would be helpful if you explain why these circumstances couldn’t be repeated.
For the government to be in a surplus, or close enough so they have a current surplus, someone else has to be in deficit. The sectoral balances show us that from 98-02 there was a large amount of corporate borrowing, and in 2018-19 there were low saving / high borrowing levels for households that came about after the 2016 Brexit vote combined with an increase in corporate borrowing, but this is more a description than an explanation.
How did we get a current surplus from 98-02 and why is this not something that could be repeated in the next Parliament?
How did we get a current surplus from 18-19 and why is this not something that could be repeated in the next Parliament?
These outcomes were only feared by unhealthy imbalances in the economy
The natural ordering is that money creator must run a deficit or it fails to deliver, quite literally
The question is not whether a government can or cannot run a surplus but what would be the point of doing so. The surplus is not something of independent value that the government can save up in its piggy bank for a rainy day but is a surplus in something past governments themselves have issued and only has value as part of a social institution we call money.
That is not to say that there might not be circumstances in which running a surplus for a period of time was wise, but that would have to be argued for. The mantra “surplus good, deficit bad” which seems to dominate much of what passes for serious economic thinking strikes me as absurd.
Not immediately related – but interesting piece by Phillip Inman on the risk of another bank collapse in the US (climate-related insurance and over valued buildings/stocks etc)
https://www.theguardian.com/business/2024/mar/09/the-us-could-be-facing-a-2008-style-financial-crisis-why-does-sunak-want-to-copy-it
He is in cheery mood
I firmly believe that the single most important way to effect transformative change is to construct a positive demonstration of that change, plus my own experience has taught me that certain visual images are impactful in solidifying that message. The first you have already accomplished with your work on the ‘Taxing Wealth Report’, but what of the second component? My suggestion requires a modest investment before resorting to a medium you are well suited to. What modest investment?
First you buy or refurb a briefcase to produce one that is bright green. Then you put together an alternative UK budget, utilizing the changes to taxation from your Taxing Wealth Report. You would then need to elaborate on the areas where you believe the UK needs to invest for public wellbeing, by reducing inequality and turbo charging the green new deal, as highlighted by that green briefcase. Your alternative budget would proudly announce the logical reason why you are not constrained by the straitjacket of fabricated fiscal rules. Once you have drafted your alternative UK budget, create one of your informative public service videos, beginning the presentation by holding up that bright green briefcase.
The purpose of holding up that bright green briefcase is to clearly demonstrate to the public that there is a positive, eminently viable alternative to the current neoliberale stalemate. The political obsession over ‘growth’ without investment is farcical and requires debunking along with those defunct fiscal rules. Common sense demands a reinvigorated emphasis on the duty of government: to manage the economy for the wellbeing of all sectors of the population, not just the wealthy elite.
Post a link to this informative video on social media where you already enjoy a strong following. You can then rely on the impact of that curious picture of you holding up a bright green briefcase, like an alternative Chancellor. Viewers will soon learn what is necessary to rescue us from the perpetual tunnel vision of misery currently on offer from all major political parties. They might even try to steal your ideas…
Well, that is something to think about ….
How the chickens come home to roost with a vengeance because of all the stupid political parties in the UK who think the government operates on a credit card and that card is maxed out!
https://www.theguardian.com/society/2024/mar/10/capacity-crunch-on-national-grid-is-delaying-new-homes-in-uk-by-years
This is deeply worrying – and a massive indication of the failure of privatisation.
An interesting article here by the 99%
https://99-percent.org/a-good-news-budget/