Rewriting the Fiscal Rules

For the whole of his chancellorship, Gordon Brown boasted about his strict adherence to the so-called "Golden Rule" about borrowing limits.

Now he and Alistair Darling are talking about changing the rules which govern fiscal policy, including the "Golden rule".

In the short term this may appear to be bad news for the country but good news for the Conservatives as it clearly demonstrates the failure of Gordon Brown's stewardship of the economy. Witness Trevor K's attack on the government in the sun earlier this week.

However, there is an even worse interpretation: that Labour realise they have lost the next election and are deliberately ensuring that as much as possible of the pain of solving the mess they have got the economy into falls onto the shoulders of the incoming Conservative government.

The suggested modifications to the fiscal rules may reduce the likelihood of an increase in taxes next year - but get the economy further into the red in the medium term and make it all the harder for the incoming government to avoid tax increases in the period 2010 to 2012.

According to Nick Robinson's blog, an economist recently told David Cameron that "the next election will be the one to lose."

Well, maybe. Presumably that economist thinks that the voters will blame the incoming government for the measures taken to solve the mess. However, the evidence of the past thirty years suggests that if a first term government taking painful measures blames them on a previous government which has only just left office, it has some chance of being believed. However, a third or fourth term government attempting to blame problems on a previous administration which left office a decade or more before, or stir up fear against the party the previous generation of whose leaders formed such a government, will be treated by the electorate with the contempt such a nonsensical position deserves.

Dare I suggest that the voters of this country are not as stupid as New Labour and some of their friends appear to think?

Comments

MaxyB said…
Has it occurred to you that the situations we find ourselves in now are directly due to the market deregulation of the 1980’s. I seem to member that the conservatives were in at the time. The fact is that the whole system is screwed and borrowing on a brighter future is not going to be an option. Take a peak at oil. What new solutions have the conservatives got? Oh yes, asset strip the country. Only thing is that there isn’t that much of it left to sell.
11:39 am
Chris Whiteside said…
No, it has't occured to me because they are not due to anything of the sort.

Market deregulation in the 1980's was followed by two periods of prolonged and stable growth, first from from the early 80's until about 1991 and then from about 1993 until this year. Both the slowdowns which interupted those periods of growth, the early 90's recession while John Major was PM and the slowdown which is hitting us now co-incided with serious world recessions.

There is no set of policies which can isolate an economy like Britain which has always depended on foreign trade from feeling some effect when most of our trading partners are in recession. Where Brown is open to criticism is not the fact that we have a recession, but in that

1) He was talking complete nonsense when he claimed to have put an end to "Tory boom and bust" - no government can completely abolish the economic cycle and as the present recession proves, Brown was being dishonest we he claimed that he had

2) He failed to put enough money aside during the good years to cushion the impact of the bad: he was borrowing far too much even before the slowdown hits, and

3) His £5 billion a year raid on pension funds and other policies to penalise saving has made the impact of recession worse.
9:19 pm
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