In the UK, the government continued to run budget deficits even when the economy was growing at rates of 3%, largely because Gordon Brown overestimated tax revenues. Now the economy is slowing, the scope for increases in spending or cuts in taxes to boost growth is constrained. A change to the fiscal rules is needed to ensure future governments cannot play fast and loose with the public finances.
Odd to find myself agreeing with Larry Elliott really.
6 responses so far ↓
1 Matthew // Oct 10, 2008 at 9:53 am
It’s not really that constrained, is it? Everyone wants government bonds.
2 Letters From A Tory // Oct 10, 2008 at 9:53 am
Well David Cameron apparently agrees with Gordon Brown so it’s obviously a time for strange things to happen…
http://lettersfromatory.wordpress.com
3 Gareth // Oct 10, 2008 at 9:57 am
Like an alcoholic, the first step on the road to recovery is admitting you have a problem. Gordon can’t do this.
4 john b // Oct 10, 2008 at 10:07 am
Matt is right; and everyone wittering about UK public sector borrowing being “constrained” is an ignorant moron. The government could borrow 15% of GDP tomorrow if it wanted, and get decent rates too.
Check the prices: http://www.bloomberg.com/markets/rates/uk.html
(and yes, Larry Elliot is certainly an ignorant moron; he believes the financial meltdown proves that the nonsense he’s been spouting for the last 10 years is correct, whereas actually it’s just a case of ’stopped clock’-itis).
5 marksany // Oct 10, 2008 at 12:27 pm
what rules? self imposed rules are meaningless. The only body that can do anything to make a leader follow his own rules is the electorate. Unfortunately we only get the chance after the fact at random points in time, not when we really need to throw the bums out.
6 Tim Newman // Oct 11, 2008 at 2:04 am
A change to the fiscal rules is needed to ensure future governments cannot play fast and loose with the public finances.
No, we needed these changes a decade ago, before Broon started spending money like a drunken sailor.
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