Tag Archives: fiscal rules

Bobby Dean writes: The Resilient State: Rethinking fiscal rules for the 21st Century

The Chancellor faces a difficult Budget.

There is little room to manoeuvre on tax or borrowing. Households and businesses are under enormous pressure. Long-term government borrowing costs have reached their highest level for decades. Yet Britain desperately needs investment.
In an attempt to reassure the markets, John Healey has earnestly pledged his allegiance to the fiscal rules. It’s a 30-year tradition. But, since 2008, Chancellors have increasingly struggled with the choices the rules produce.
We have seen the consequences.

Covid exposed an NHS with too little spare capacity. The energy crisis exposed our dependence on volatile oil markets. The hottest summer ever has demonstrated the threat that global warming poses to our infrastructure.

In an essay published yesterday by the New Economics Foundation, I argue that we need to change the question at the heart of every Budget from “What can we afford to borrow now?” to “What investment do we need to make to be better off tomorrow?”

It’s not an argument for borrowing more. It’s an argument for better spending.

While we must maintain debt discipline through strong rules, there are three fundamental problems with wider fiscal management that I believe we need to fix.

First, is the crude distinction between investment and day-to-day spending. Buying a tank is treated as investment. Training specialists to defend us from cyber attacks is not. We need to broaden how we define investment to recognise the value of people and skills.

Posted in News | Also tagged , and | 4 Comments

Vince Cable writes…Labour and Fiscal Rules

The nation waits for the people of Makerfield to decide whether Keir Starmer will face a challenge from his most plausible and electable Labour critic. Were Andy Burnham to emerge victorious and to challenge for the party leadership, this would signal a shift to what is being called the ‘soft left’.

One of the most deeply held convictions of those in this political space is that the government is being held back from more ‘progressive’ policies by unduly restrictive fiscal rules which exist to reassure ‘the bond markets’ that the UK is a trustworthy, reliable borrower.

Andy Burnham’s position on the …

Posted in Op-eds | Also tagged , , and | 27 Comments

Should Lib Dems rethink our new fiscal rules after our successful General Election campaign?

Following the announcement of the new (so-called) £22bn ‘Black Hole’ in the Government’s finances, Chancellor of the Exchequer Rachel Reeves has announced over £3bn in departmental spending cuts, making the winter fuel allowance mean-tested, and scrapping the previous government’s social care reforms (which set a maximum of £86,000 on a person’s personal care costs) meant to be implemented eventually in October 2025.

During the General Election it was generally recognised that there would need to be cuts to the non-protected departmental budgets, which the Resolution Foundation said could be as much as £33bn and the IMF said could be about £30bn. During the General Election the Labour Party talked of less than £10bn in extra government spending.

In our Manifesto we suggested how £19bn more could be raised from increased and new taxes. These included  buy-backs, increased taxes on social media firms and tech giants and reforming capital gains tax, as well as including one copied by the Labour Party, higher taxes on the energy giants (but raising £900 million less than ours).

There is a way forward, which our pre-Manifesto passed in the Autumn Conference of 2023 proposed. We stated that we would  “safeguard the UK’s economic prosperity while making the investments our country needs. We will make sure that day-to-day spending does not exceed the amount of money raised in taxes over the medium term…”

However, in our Manifesto those words were replaced with, “Foster stability, certainty and confidence in managing the public finances responsibly to get the national debt falling as a share of the economy and ensure that day-to-day spending does not exceed the amount raised in taxes, while making the investments our country needs.”

Why make that change? It would leave us on the same horns of a dilemma as the new Chancellor has. You can’t simultaneously pledge to reduce the national debt AND pledge to make the investment the country needs, in one parliamentary term.

Posted in Op-eds | Also tagged | 130 Comments
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Recent Comments

  • Tim
    @PM. Yes, allowing a LOT more houses to be built would reduce wealth inequality dramatically. We should aim to return to the c1997 price to income ratios - whic...
  • Peter Davies
    and building more houses of course....
  • Peter Davies
    The rising property market contributed more to the impoverishment of the poor than the enrichment of the rich. It is owner occupiers who hold the greatest propo...
  • PM
    @ Tim, You may be technically correct with your argument but it doesn't change the fact that we have become very much more unequal in recent decades. The ...
  • Mick Taylor
    @ColinMurphy. Yes and you could close all the tax loopholes and greatly reduce the huge number of pages in the tax codes that take a highly qualified accountant...