When Tony Blair came to power in 1997 he and his Chancellor Gordon Brown were keen to make sure they didn’t unnerve the City.
As part of this, they promised to stick to the spending forecasts of the outgoing government.
The outgoing chancellor Ken Clarke said he thought this was pretty funny, since he had no intention of so doing.
There’s a really good letter in Tuesday’s FT which relates to that idea, though it isn’t about Clarke or Brown.
Jagjit Chadha, director of the National Institute of Economic and Social Research, says the UK is on track for a “fiscal farce”.
He says the UK government sets “an arbitrary” level of debt it must not pass.
When it does, it just changes the rules.
So the Office for Budget Responsibility will decide that “some items of debt can be excluded from the count”. Hence, as he sees it, the turning of “economic tragedy” into the aforementioned farce.
It’s a reasonable point of view, well expressed.
There’s another way of looking at it.
Which is that since the debt level is, as he says, arbitrary, and that level will be broken at will anyway, why have the rule in the first place?
No City economist thinks that the UK is in any danger of going “bust” or “bankrupt” or any variant thereof. It has its own currency, it can spend more or less what it likes.
The question, noted here yesterday, is whether it should do that.
As for predictions of economic calamity, well, depending on your definition of calamity, they tend to be overdone.
Liz Truss gave it her best shot, but the bond markets recovered remarkably quickly once she was gone.
The government’s ability to borrow as it wishes at relatively cheap rates is back in place.
As for fiscal farce, well, the rules shall be breached. Perhaps we should ditch the rules and pick another proxy for good decision making.
