They would ensure that bad fiscal policy was bad politics, says Tim Leunig
became fashionable in the 1990s, and now exist in every advanced country and most others. Britain’s first fiscal rule came with the 1992 Maastricht Treaty, which paved the way for a single European currency. Its first domestic rule dates to 1997.ratio was 27%, rising to 42% in 1997 and 100% now. Debt levels are at or near record levels in France, Italy, Spain and America. In contrast, debt has been broadly stable in Germany and the Netherlands, and has fallen for 25 years in Sweden.
The current rules require the government to hit borrowing and debt targets in five years’ time. Because the target is rolling, the deadline can be constantly moved back, allowing implausible spending cuts or tax rises to satisfy the rule. The opposition Labour Party—which is widely expected to be in government by the end of the year—has not set out its proposed rule, so it is not possible to say whether it will be better or worse.
Instead I propose something more qualitative. Each year, just before the chancellor of the exchequer unveils the budget, the chair of the Office for Budget Responsibility —the fiscal watchdog created in 2010 to provide independent forecasts and analysis—should be required to write 250 words, summing up Britain’s fiscal position, and the effect of the budget on that position.
“Britain’s fiscal position is the worst for 50 years. This budget will exacerbate the problem. The government’s fiscal plans for the next five years are worse than fiction, because with fiction an author has bothered to think about a storyline and an ending. The aggregate spending totals proposed are implausible: the government’s overall fiscal position is not credible.
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