Much has been said about UK chancellor Rachel Reeves’ self-imposed fiscal rules, and her repeated assertion – which she included in the spring statement – that they are “non-negotiable”. Of course, this is true if you’re not prepared to listen to alternatives, but in the real world there is no set economic template with which people cannot argue.
Put simply, the chancellor’s rules demand that day-to-day expenditure should be covered by government income at the end of the five-year economic cycle. This is what has led to the current need to cut spending – including to health and disability benefits – so drastically. The length of this cycle is determined by the government as part of their “rule”.
All of this is predicated on the government’s belief that economic policy will be undermined if the international financial markets (including the bond markets on which governments depend for borrowing) react badly. Which, it is commonly asserted, would significantly push up the cost of borrowing. Other factors, such as US president Donald Trump’s extraordinary threats to trade, and the borrowing requirements of other countries, will also have an immediate impact.
