New fiscal rules?

I read that the Treasury is getting round to reconsidering their fiscal rules. That is a  necessary and urgent task.

There are two key rules affecting the conduct of economic policy that are in place today that  I think should continue.

The first is the 2% inflation target that is meant to guide Bank of England interest rate decisions. It also needs to guide the Treasury as they make decisions on levels of money creation and bond buying with  the Bank of England, and as through fiscal policy  they  have a substantial  impact on inflation.

The second is the debt interest rule, that the interest charges on government debt should not exceed 6% of revenues. They are under half that at the moment, thanks to very low interest rates and to Quantitative easing. This is a sensible target to continue, and could be toughened to 5% of revenues.

There are two rules over the deficit. The first is it should be brought back to balance on current spending within a three year horizon. This is a bizarre target, as the government/OBR  hits it by forecasting favourable changes three years out which might never take place.  The second is capital spending in  the public sector should be limited to 3% of GDP. It has been running below this for some years. Capital spending levels should primarily be judged on prospective returns and ability to be self funding over time.  Add these two targets together and we return to the Treasury’s much loved Maastricht target of keeping the deficit down to 3%. The OBR/Treasury are also still wedded to the idea that state debt as a percentage of GDP should be brought down, so they encourage ministers to impose tax rises and spending cuts to get state debt as a proportion of GDP falling. This reflects the Maastricht requirement to get state debt down to 60% of GDP sometime.

It is high time we cancelled the Maastricht austerity targets. The Treasury still reports how we are doing against them as if we were still governed by the EU Treaty that made that necessary. Instead we should have a growth target. Like the Fed the Bank of England should have the twin targets of low inflation and faster growth. A growth target would stimulate more thought and action in government to raise living standards and follow policies that boost UK jobs, incomes and business. A suitable growth target would be to aim to return to 2.5% per annum growth from the more anaemic levels of this century under Maastricht austerity.

111 Comments

  1. Oldwulf
    September 18, 2021

    Sir

    “… the interest charges on government debt should not exceed 6% of revenues. They are under half that at the moment, thanks to very low interest rates and to Quantitative easing. This is a sensible target to continue, and could be toughened to 5% of revenues.”

    By the time interest rates are increased, does this mean that we will need to have paid off debt or else we will need to increase QE ?

    1. GilesB
      September 18, 2021

      Interest rates could easily double overnight so that’s not much comfort.

      An important target should be the duration of the government debt. If it is all short-term then an interest rate rise is crippling immediately. If most of the debt is long-term, then interest rate rises only impact the small proportion of debt that needs refinancing each year.

      With interest rates so artificially low, now is a great time to issue long-term (30 year plus) debt.

      In particular, a Conservative government should be issuing inflation-linked long-term bonds to the public. If they comprised say 25% of total borrowing it would be a great incentive for future parliaments to stop inflation running away.

      They would be very popular for pension planning

      1. Dave Andrews
        September 18, 2021

        I am very uncomfortable about 30 year bonds. It’s a way of loading the next generation with the excesses of the current generation. No doubt though they in their turn will shaft the next generation after them.
        Ultimately a generation will arise who will say “Not our debt”, form a new state and declare the old one bankrupt. This is most likely in Japan first, and then think what the contagion will be like across global bond markets as other societies say “me too”.

        1. GilesB
          September 19, 2021

          The next generation benefits from investments in infrastructure.

          I agree that current expenditures should be funded from current revenues (with some allowance for imbalance within an economic cycle).

          The trillions to be spent on ‘net zero’ are not for the benefit of the current generation.

      2. Hope
        September 18, 2021

        More propaganda JR? How about the promised balanced structural deficit by 2015,2017,2019,2021 and then abandoned. You mean these sort of rules? Low tax conservatives! Community charge freeze changed to go up 5% year on year with no improvement and add on for flood defence and social adult care. Will these add one now be scrapped as NIC is going to pay for it?

        Can we expect more lies and spin? Your party has caused havoc to the economy, rules that are never fulfilled, promises broken time and again. Better still borrow billions and give away to overseas aid!! How about the camps in Syria to stop immigration on our shores?

        Your party and govt. after 11 has no credibility in its manifesto, promises, rules or anything else. Your govt. record demonstrates graphically it is about lies and spin. How many token policy changes to deceive the public? Could we have a list please.

        Johnson told us last year the boat people would be sent straight back, he said that knowing he signed up to ECHR in his Brexit sell out and knowing UK is a member of the UN Migration Pact. I cannot recall you calling him out in parliament.

      3. rose
        September 18, 2021

        The temptation for governments all over the world is to stoke inflation in order to cancel their debts.

  2. Oldtimer
    September 18, 2021

    Growth matters most. The government has within its gift the ability to promote it or strangle it. For most of the post WW2 years strangulation seems to have been the preferred Treasury option The garotte of choice has been taxes. These are administered with varying degrees of strength but increasing complexity. Many industries have died as a result. More are scheduled to die in the years ahead under the banner “net zero” with no apparent regard for the consequences – as we now discover as Russia too has decided to apply its own garrotte via reduced gas supplies to Europe. Perhaps one day we will get a government that understands the elementary facts of economic life. My hopes are not high; we seem to be governed by economic duffers.

    1. Mike Wilson
      September 18, 2021

      Growth of what?

      1. oldwulf
        September 18, 2021

        MW
        Growth of private spending, growth of incomes and profits and growth of tax receipts – without an increase in tax rates.

      2. Hope
        September 18, 2021

        Growth of other taxes! Insurance Premium Tax started off under the fake Tories at 2.5% and is currently 12% and 20% for travel!! Those low tax conservatives eh! Those who think the 1.25% NIC will not rise and expand are for the birds. Look at JR’s party and govt record. JR’s fiscal rule nonsense can be torn apart by his govt.’s actual record.

        1. glen cullen
          September 18, 2021

          I can’t believe I’m going to say this but vote Labour and get lower taxes

          1. Micky Taking
            September 19, 2021

            love it. A welcome laugh on a gloomy Sunday morning.

      3. Oldtimer
        September 18, 2021

        Growth of output that generates sales revenues, jobs, profits and taxes thereon.

    2. lifelogic
      September 18, 2021

      Indeed but this idiotic & socialist government have chosen the let us strangle real growth route with high and increasing taxes, big government, pointless lock downs, big government, travel restrictions, expensive intermittent energy, large increases in red tape, net zero, state monopolies in health care, education, soft loans for worthless many degrees…

      1. Hope
        September 18, 2021

        LL,
        But the services provided are woeful. We had the civil servant mandarin this week advocating at the select committee for more work at home!!

        How about actual productivity or the wider economy. It might save greedy left wing civil servants money by working at home, it might cut down their work or availability. But the taxpayer should be outraged. Johnson was going to force these back to work, what happened? As usual he caved.

        Same for local authorities across the country and MOD. Maud was going to sort out the civil service years ago, same old Tories big on promises, lies and spin, but no action.

        1. Lifelogic
          September 18, 2021

          Indeed totally pathetic public services and hugely high taxes.

        2. Fedupsoutherner
          September 18, 2021

          Hope. Might be why people who have reached pension age haven’t received their pensions. Too much sitting on bums at home. Cushy number if you can get it.

    3. No Longer Anonymous
      September 18, 2021

      They listen too much to a privileged, idle, faux-educated shouty class with too much time on its hands which does not know one end of a spanner from another. (I’m thinking the white element of XR, BLM, Trans…)

      It’s no wonder when the BBC and MSM amplifies them way beyond their numbers.

      The Red Wall was the North screaming “STOP POLITICAL CORRECTNESS !”

      1. lifelogic
        September 18, 2021

        Indeed and the police are on the side of the M25 blockers rather than the many thousands illegally held up for hours in traffic jams by them. Why on earth was the appalling, incompetent, woke, diversity obsessed Cresida Dick retained for 2 more years? She is more of a police trade union leader rather that someone who actually tries to serve and protect the public. We need real deterrents & not for these people to be further encouraged in their economic vandalism.

    4. Nota#
      September 18, 2021

      @Oldtimer, @Mike W, @LifeLogic, @NoLonger – fiddling while Rome(The UK) burns comes to mind. More frieghtenlingly it appear to be the policy and aim

      1. Lifelogic
        September 18, 2021

        +1

    5. NickC
      September 18, 2021

      Oldtimer, Labour sold off our Nuclear electricity build capability (Westinghouse); Conservatives wouldn’t fund the Rough gas storage facility (needed for strategic reasons, not commercial reasons). This fuel crisis was just waiting to happen; and our governments have been told over and over. And, no, windmills don’t hack it.

      When, oh when, is our stupid establishment going to learn that Jonny Foreigner does not owe us a living? The UK needs a strategic reserve or a minimum capability in supplies of everything from food and water to fuel, steel, aluminium, cement, gas, electricity, etc, etc.

      But getting government to admit it is like Cnut trying to get his (English) court to understand that Kings don’t control the tides (or the weather), and effective work must be done to achieve anything.

  3. Mark B
    September 18, 2021

    Good morning.

    The second is capital spending in the public sector should be limited to 3% of GDP.

    /

    It is not how much, in percentage terms, we should be guided on what we spend, but what on. For example. Spending on hospitals & schools can be considered reasonable investment given the type of economy we run. Spending on things we either do not need or can be done with private money, not so. The question is which ?

    Instead we should have a growth target.

    I believe we should not be delving into Keynesian economics and using the State as a means to artificially grow the economy. With the State making all the running, inefficiencies, waste, corruption and poor competitiveness creeps in. The State also displaces Private investment and distorts markets leading to dependency from medium and large business further eroding efficiency. Think of the car industry in the 1960’s – early 1980’s to know what I mean. Now look at the same manufacturers today. Better managed with better products doing very well thank you and no government.

    1. DOM
      September 18, 2021

      Absolutely. Government once had honourable intentions regarding public spending. Today it’s become a brutal hammer to further its own position. Giving it more money to spend it utterly backward.

      The public entity that covers government, State and dependent vested interests waste billions for vested interest purposes that if copied in the private sector would lead to mass bankruptcies

      It is quite simple. The public sector doesn’t give a toss about how they spend taxpayers cash, they actually enjoy wasting funds and then pleading the ‘underfunding’ bullshit narrative just before budget time

      The tedious political-public sector narrative of a ‘collapsing NHS’ is so offensive that it becomes almost provocative. We know the NHS is a bottomless pit of waste. We know they abuse their position to extract max funding from terrified politicians who fear reputational damage should they not accede to such NHS demands. The NHS need exposing before they bankrupt the UK

      Mid Staffs exposed the NHS for what it as become. No wonder that event is never splashed over our tv screens each day which it would have been if it was BUPA for example

      Noses in the trough politics, public sector party time for Labour

    2. SM
      September 18, 2021

      +1

    3. NickC
      September 18, 2021

      Mark B, There is a belief in government (and by MMT adherents, etc) that somehow the government is exempt from normal economic constraints. The fact that our governments continually come a cropper over their finances demonstrates that belief is false.

  4. Sea_Warrior
    September 18, 2021

    This voter wants to see more focus on the GDP/capita measure. Your party’s flooding the country with illegal immigrants and refugees suppresses it.

    1. No Longer Anonymous
      September 18, 2021

      And a true measure of inflation that matters, housing costs and shrink-flation.

      A Mars Bar is a reliable measure of true inflation. Seen the size of one lately ?

      1. MiC
        September 18, 2021

        Shrink-flation applies to houses too.

        Seen the latest new builds?

      2. Sea_Warrior
        September 18, 2021

        Thank goodness for multi-packs!

  5. PeteB
    September 18, 2021

    How about an overall tax as % GDP target? Given the health tax/levy takes taxation rates to a level not seen for decades a tighter target that constrains spending would be an interesting concept.

    Also a target for the proportion of the economy represented by the public sector? Again we are heading for a record high right now.

    1. lifelogic
      September 18, 2021

      Indeed 20% is about right and we are heading for 50%. So much of this spending no only does no good it does positive harm. Worse still OTT government regulations make much of the private sector workers essentially parasitic to in attempting comply with daft and misguided regulations, complex tax rules, employment laws and the likes. Government spending as a % of GDP is a better measure and they are even worse on this measure.

      1. lifelogic
        September 18, 2021

        You get fired for calling people “love” now it seems. But not mate! Will the employment tribunals be giving us a dictionary of allowable and banned words net? Will this vary by different regions. Let people concentrate on running their businesses please.

        1. NickC
          September 18, 2021

          No, no, Lifelogic, what’s more important – personal pronouns, BLM appeasement, and CAGW flagellation – or ensuring the UK has strategic reserves of energy and other vital supplies such as food and water, and a minimum industrial capability to service it all? The government clearly thinks going wokey green is more important than keeping the wheels of civilisation on.

    2. Nota#
      September 18, 2021

      @PeteB – mute point, it is the highest in 70years – nearly 2 generations

  6. David in Kent
    September 18, 2021

    The new targets you suggest would be welcome. I’d like to see a couple more issues addressed.
    We need to increase capital spending, both public and private, and we should be aiming for a surplus on our external trade for a while so we can stop selling all our new companies before they have a chance to be world leaders. Whether these are best addressed by having targets is another matter.

  7. Nig l
    September 18, 2021

    Maybe your criticism is more to do with their origin indicating a continuing tie with the EU than the Treasury thinking they are fit for our purpose irrespective of origin.

    Sunak should make it clear in his autumn statement that the new rules are very much attuned to the needs of the UK. We continue to see divergence spin but has anything really happened?

    1. lifelogic
      September 18, 2021

      Who would trust anti-business tax to death Sunak? 2.5% on NI, 21% on CT, 90% cut in entrepreneur’s CGT relief, taxing landlords on profit not even made, all allowances frozen, IR35, net zero lunacy, expensive energy shortages. Growth & investment is clearly something he hates.

      Less efficient petrol now forced on to us is yet another back door increase in fuel taxes too.

      1. Hope
        September 18, 2021

        Please, expect tax rises. Look at Sunak’s budget 2020 eleven days before lock down. Johnson is tax spend and piss down the drain. Look at his chaotic private life: scrounges off others to pay his bills, when caught then decides to pay. Socialists spend other people’s money- this govt.

        1. Lifelogic
          September 18, 2021

          +1

    2. Atlas
      September 18, 2021

      Agreed.

      The Treasury would appear to be trying to keep matters so that a future government can be re-enslave us to the EU with minimum effort.

  8. DOM
    September 18, 2021

    Party political considerations will always trump such guidelines simply because the contemporary politician in government isn’t concerned with anything other than the interests of the party they represent. Moreover, the contemporary politician is a shapeshifter without form or morality or beliefs. They cannot be trusted and fiscal rules such as these are a mere tool of narrative to create the impression of fiscal competence.

    What we are seeing is a political attempt to deceive the public into believing that the lunatics who have taken over the asylum are responsible custodians and moral stewards of our nation which of course is laughable

    This Chancellor is captured by his history as is his party. Dig into his past and his current political position appears almost beyond belief. Can someone change their entire mindset in a small number of months? Well, yes, if you’re a politician whose only concern is party and personal interest

    The State, this government and the entire panoply of dependents is a parasitic entity when once the State defended our interests now they seek to erode them and both parties now occupy the same political ground.

    So, can we please stop this charade that the Tory party are responsible stewards of our nation? They definitely used to be until they defenestrated MT. Now, the party is as vile and reprehensible than Marxist Labour.

    Thank god for the private sector that we are look to on a daily basis to feed us, warm us, water us and clothe us without which we’d be bereft.

  9. Nig l
    September 18, 2021

    And in other news Lord Bethell has resigned following criticism of 33000 government e mails via his private account and question marks how contracts were awarded and a phone full of data mysteriously ‘breaking’ six months ago.

    In their desperation to protect their chumocracy No 10 previously said this was acceptable.

    Hancock did the same thing giving a contract to his publican etc and again No 10 said all was well.

    No 10 should get their collective heads out of their backsides and stop taking us for fools.

    1. MiC
      September 18, 2021

      You’ve known this for years.

      Why do you persist in voting for them?

      1. Lifelogic
        September 18, 2021

        I do not – but most do as the alternative is far worse.

      2. Fedupsoutherner
        September 18, 2021

        MIC. Who else would you suggest?

        1. Micky Taking
          September 19, 2021

          Farage? – – – there I’ve said it. Cue – howls of outrage.

          1. MiC
            September 19, 2021

            Please, be my guest.

    2. DavidJ
      September 18, 2021

      +1

  10. formula57
    September 18, 2021

    These sort of rules exist presumably only to send signals to markets, thereby to shape expectations: they do not constrain Government when expediency threatens. Accordingly, whilst the rules might be made more suitable to prevailing circumstances always provided they do not then frighten anyone, does the detail of them matter? (Admittedly it would be nice to see HM Treasury at long last explicitly acknowledge that the country it most interferes with is no longer bound by Evil Empire demands.)

    1. Dave Andrews
      September 18, 2021

      Yes, they are not so much rules, not even guidelines, more like aspirations. Remember Gordon Brown’s five golden rules? All fine until the financial crisis hit and then they were toast.

  11. MiC
    September 18, 2021

    It’s a tricky one, isn’t it?

    Soaring food, energy, and fuel costs will no doubt raise inflation significantly.

    Raising interest rates would leave many people with even less to spend on them, however.

    Welcome to the sunlit uplands.

    1. Original Richard
      September 18, 2021

      MiC :

      Not only in the UK according to Reuters :

      https://www.reuters.com/world/europe/euro-zone-inflation-surges-10-year-high-big-headache-ecb-2021-08-31/

      “Euro zone inflation surges to 10-year-high, in headache for ECB.

      Consumer inflation in the 19 countries sharing the single currency accelerated to 3% this month [August 2021] from 2.2% in July, far above expectations for 2.7% and moving well clear of the ECB’s 2% target.

      The increase was fuelled by energy costs, but food prices also surged, while there were unusually large increases in the prices of industrial goods too, according to Eurostat, the EU’s statistics agency.”

      It will be especially tricky for the EU/ECB as the EU countries have such diverse economies and any measures taken will have winners and losers as a consequence.

    2. Andy
      September 18, 2021

      Indeed. Sad, isn’t it Martin? The Brexitists promised lower food prices.
      Look at what they have done instead.

      1. Micky Taking
        September 19, 2021

        What have I done Andy? Honestly over the last 18 months and more, me and ‘er indoors have done our bit by eating more than we should. All in an effort to ensure Waitrose and sometimes Sainsburys can buy in more food for us to buy. More bought should mean cheaper, right? Beginning to regret our willingness to help (didn’t go for Eat out, Help out, or whatever that daft phrase was) – we did our bit, now we have to shift the new larger Mr & Mrs M.Taking.

    3. NickC
      September 18, 2021

      Martin says: World fuel shortages and fuel costs soaring due to Brexit!

      1. MiC
        September 18, 2021

        Where did I say that?

  12. X-Tory
    September 18, 2021

    “The Treasury still reports how we are doing against [the Maastricht austerity targets] as if we were still governed by the EU Treaty”. Why don’t you simply and directly ask the Chancellor WHY this is? I would love to see his answer!!

    As for your idea of a growth target, I couldn’t agree more. It seems so obvious and beneficial that again I wish you would ask a simple question as to WHY they don’t do so.

    If you have asked these questions then it would be helpful to your readers here if you were to publish the Chancellor’s answers.

    1. MiC
      September 18, 2021

      I don’t think that one any longer follows from the other.

      It’s more a case of Parallel Evolution, I think.

    2. Dave Andrews
      September 18, 2021

      I think the Maastricht Treaty limit of 60% a much better target than the 100% we currently have. If I had my way, the target would be around 0%, with the country varying between surplus and deficit. The surplus years could finance infrastructure projects and rationing of pensions and benefits to level things in the deficit years.
      This will upset those who were sold the lie that their working life NI contributions paid for their state pension.

  13. Richard1
    September 18, 2021

    Well surprise surprise, it is reported that the Putin regime is using its gas stranglehold on Europe to yank up prices to depress economic recovery in Europe. Who would have guessed it? Govts have been exceptionally foolish to restrict domestic supply leaving us in hock to such a regime – for example by stopping shale gas exploration. The merkel govt in Germany (supported by all other parties in Germany) has done a huge disservice to the whole of Europe and the West by progressing the Nordstream2 pipeline, a decision of incalculable folly. Wind power – again who would have guessed it? – is proving inadequate because (apologies for this very technical explanation coming up): the wind doesn’t always blow, and even when it does it falls far short of requirements.

    1. Philip P.
      September 18, 2021

      According to reputable publications such as Bloomberg and Barrons, there are several factors driving up gas prices. Increased demand to compensate for eliminating coal as an energy source is one of them. Demonising Putin is pointless: of course Russia wants to trade in gas with Europe, and does not want to have to channel it via a pipeline running through Ukraine, which was long suspected of diverting some of the gas for its own use. Germany and other European countries have every reason to welcome Nordstream, rather than buying US liquefied gas at nearly double the price.

    2. Hope
      September 18, 2021

      Johnson buys 82% of coal from Russia when we have our own reserves!! Johnson and this useless govt. is a complete lost cause.

      Meanwhile how much is energy going up for ordinary folks? God help is from this socialist govt led by Johnson.

    3. NickC
      September 18, 2021

      Richard1, Exactly so. Wind needs back-up for when the wind doesn’t blow – shock! horror!! Armageddon!!! And the only viable clean long term dispatchable back-up is Gas. So why aren’t we using Lancashire shale gas? Has the government got any real answer rather than just waffle, waffle, climate, waffle, extinction, waffle, waffle? All homeowners to clap along to Carrie on Boris’s new songs: “Here we go gathering climate waffles in winter”, and “Do Andydroids dream of electric cars?”.

      1. SM
        September 18, 2021

        +1*****

  14. Everhopeful
    September 18, 2021

    I hope that JR read this in an official document just sent to MPs.
    I hope he didn’t have to read it in some old newspaper!
    Before coming to this blog I had no idea how remote the “government” was from its MPs.
    How little influence the MPs seem to have over policy.
    How little the young but powerful whippersnappers seem to seek the advice of those with much more experience and wisdom.

  15. Ian Wragg
    September 18, 2021

    The Treasury is still in the EU along with most other government agencies.

    1. Ian Wragg
      September 18, 2021

      Irony of ironies, gas price doubles due to worldwide high demand, we sit on millions of tonnes of coal and millions of cubic feet of gas. Fertiliser plant shut down so we have shortage of dry ice and CO2 for food processing.
      We will now have to import CO2 which is probably part of Carries plan to cripple yet another industry so we can import Fertiliser.
      Build back better as envisaged by the green blob is 100% on track.

      1. Micky Taking
        September 19, 2021

        But No 10, is doing its best at generating fertiliser.

    2. Hope
      September 18, 2021

      Yep, working from home saving themselves a fortune and doing little for their pay and pension.

    3. DavidJ
      September 18, 2021

      +1

    4. NickC
      September 18, 2021

      So true, Ian.

  16. Everhopeful
    September 18, 2021

    I bet the treasury is desperate to keep the Maastricht wedge in the door.
    To drag us back into the EU at the first opportunity.
    Or maybe it is a nostalgia thing?

    Johnson/EU….even I’m not sure. Better the Devil….and Devil and Deep Blue Sea!

    1. DavidJ
      September 18, 2021

      +1

  17. Christine
    September 18, 2021

    This government should be concentrating on building the UK economy and reducing debt.

    I am appalled with Boris Johnson’s saber-rattling regarding China:

    “On Thursday, Theresa May challenged her successor, asking during a Commons debate whether the newly signed AUKUS defence pact could lead to Britain being dragged into a war with China over Taiwan.”

    Boris’s reply:

    “The United Kingdom remains determined to defend international law and that is the strong advice we would give to our friends across the world, and the strong advice that we would give to the government in Beijing,”

    Is he trying to provoke another Afghanistan?

  18. Chris S
    September 18, 2021

    The AUKUS pact is an interesting development for Global Britain.
    China is the greatest threat to world peace and the consequences of a conflict in the South China Sea are immeasurable.

    China believes it holds all the cards but in reality, their greatest weakness is their trade surpluses with the West. We should all be embarking on a coordinated plan to reduce purchases from China as a response to their beligerent attitude and appalling human rights record. A 10% reduction in orders would devastate Chinese economic growth which is the one thing that keeps the Communist Party in power.

    Meanwhile, the pompous Macron has had his nose well and truly put out of joint. For all his protestations, the diesel sub deal was already dead in the water with the French unable to get within a decade of the specified delivery date.

    However, I’m sure Macron was more angry at the loss of face from being excluded from the AUKUS deal, especially when Britain is one of the three partners. Boris has played a blinder.

    1. Micky Taking
      September 18, 2021

      Nothing to do with Boris, Biden’s advisors have had enough of Chinese posturing, and the Aussies are well hacked off with Chinese threatening….a little payback time is all it is.
      Now if the US had handed over an ‘oven ready’ sub complete with missiles and warheads we might all say ””whooaa”” steady on.

  19. Everhopeful
    September 18, 2021

    I keep asking this I know.
    But I wish some economist would explain.
    Why in 2020 did the IMF tell countries in its sway to spend, spend, spend.
    And now this year tells them to hike taxes.? Seems potty to me…or is that strategy meant to stimulate growth?
    I assume that the U.K. does as the IMF tells them?

  20. Chris S
    September 18, 2021

    I have never understood why governments have attempted to control inflation by taking money out of poeples’s pockets by putting up interest rates, thus increasing mortgage costs. That hits those families who have struggled to buy their own home hardest. They need to be encouraged because home ownership takes them out of dependency on benefits, particularly housing benefit in retirement. The direct result is always a huge and artificial increase in profits for the banks.

    There are plenty of other ways of reducing spending available to the Treasury. If they want mortgage payments to go up temporarily, it would be better to require that extra money be paid towards reducing the customer’s debt. The effect on inflation would be the same but the customer would benefit rather than their lender.

  21. ukretired123
    September 18, 2021

    Fiscal rules seem to being applied at long last to France on the £54 m to stop migrant crossings.
    Perhaps “Subs operating in this area likely to surface at any time and upend French interests” May help….

  22. The Prangwizard
    September 18, 2021

    The most important issue facing us is our balance of trade/payments. The horrendous deficits are ruining us. If we had positives we would not need to borrow for everything.

    We must make more of what we consume here at home and by doing so the supply chain would be here. And we must stop the prostituting our country by inviting foreign interests claiming it to be an attractive investment and good for us. Often they come here, rent a big shed and bring their products over.

    And we must make more here that people overseas want to buy. The wrong attitude is all over government with talk about Free Trade/Global trade. Why wish for lower tariffs so we can import more, which is where the emphasis seems to be.

  23. glen cullen
    September 18, 2021

    Fiscal rules are meaningless with 1,000 illegal immigrants crossing the channel every day…that’s another 1,000 today
    This government need to get its priorities in order and get a grip of the situation

    1. glen cullen
      September 18, 2021

      **Update** BBC reporting: The USA Biden government is set to fly back to Haiti thousands of migrants who have gathered under a US-Mexico border bridge in recent days

      We can’t even return a single boat from France mid channel, absolutely pathetic

      1. Micky Taking
        September 19, 2021

        Have they had their Covid jabs evidence before boarding?

  24. Roy Grainger
    September 18, 2021

    You mention the 2% inflation target the BoE has but not their new target to support net zero. I imagine fiscal rules will have to be broken left right and centre to enter that particular state of Narnia.

  25. alan jutson
    September 18, 2021

    How much of our debt is at a fixed interest rate John?

    I simply ask this because surely this should ultimately determine future policy strategy, if we are on flexible interest rate terms, then inflation and rate rises could render any policy planning pointless and useless.
    If the majority of our borrowing/loans are on a fixed rate basis, at least we could then perhaps plan with rather more certainty.

  26. Nota#
    September 18, 2021

    There is a lot to be concerned about in terms of the UK economy. Going off and playing the green agenda, particularly in the sense of doing it faster and better than all your competitors have any intention of doing – is the complete way to totally trash the UK economy.

    From todays the MsM – “GPs have demanded more money to return to face-to-face appointments” – so the extra 38% reward is to be gobbled up by paying more for the contract already agreed. If anyone thought the unions in the NHS would not exploit the situation they were dreaming

    “Russia has been accused of increasing gas prices in a bid to undermine Britain and the EU’s economic recovery from the Covid-19 pandemic. “ We have the resources, the ability and capability to avoid this. Russia is not going to at any stage play to any green agenda. But the UK Government is prepared to put the UK economy under the cosh

    ‘Its the economy – Stupid’

  27. Nota#
    September 18, 2021

    If half as much time was spent on growing a self-reliant resilient economy as this Government does trashing the UK economy, these sort of questions wouldn’t need to be asked.

    My suspicion under the Government no how well meaning it could be spun, is this is another attempt to tinker to deflect. The actual economy – ‘does it matter there is always the taxpayer to bail us out’

  28. Andy
    September 18, 2021

    Government fiscal rules are irrelevant because the government can just change the rules whenever it likes. And there is no sanction for breaking the rules anyway. If the Chancellor breaks the rules he doesn’t lose his job. He just sets new rules.

    The most important thing is the impact of government policy on people – and this government, elected by a minority of voters, has failed just about everyone.

  29. Mike Wilson
    September 18, 2021

    I asked earlier and there was no reply. My question is not facetious. This ‘growth’ you all seem to want – growth of what?

    And why do you want it?

    Seems to me the only way the government grows the economy – as measured by GDP – is by constantly increasing the population. Is this what you are after?

    Surely what you would want is higher productivity so you can produce the same amount but we valid all work less. So we would need growth in productivity, no growth in the economy and everyone (being more productive) working less hours.

  30. paul
    September 18, 2021

    They are alright and lovely people as long as you can afford them.

  31. DavidJ
    September 18, 2021

    We need to rid ourselves of everything that was imposed on us by the EU or was part of EU membership. Anything that continues is not what we voted for. i.e. “Leave the European Union”.

  32. Pauline Baxter
    September 18, 2021

    I’ve never claimed to understand ‘finance’ but I do have some common sense.
    Wouldn’t it be wonderful if inflation was kept to 2% or less since we are threatened with the triple lock being removed.
    If the scare stories about energy prices are to be believed that pipe dream has already vanished.
    Capital spending and the Maastricht Treaty. Public Spending? Depends what on!
    For heavens sake – NO MORE BUREAUCRATS/MANAGERS!
    Tell those in the Treasury, bin the Maastricht thinking.
    Tell the powers that be to invest public money first and foremost, in producing electricity for the national grid, FROM RELIABLE SOURCES.
    Pat them on the back for AUKUS if it helps, pointing out that Oz has uranium and we NEED nuclear power for our electricity grid.
    It does not produce the ‘dreaded’ CO2.

  33. Sea_Warrior
    September 18, 2021

    Will government soon have another big fiscal decision to make, regarding Green energy? If bills continue to soar, won’t there be demands that the government does away with its levies on them, on either a temporary or permanent basis? And won’t that then lead to demands, from the unwashed, that general taxation pays for the shortfall? A test on this government’s conservativeness is coming and a Commons debate is needed.
    P.S. I would ditch the levy until prices have returned to near normal – and not make up the shortfall.

  34. Andy
    September 18, 2021

    The failure of Tory pensioner Brexit now risks becoming a national emergency.

    The shortages of food and other vital supplies that the Brexitists have imposed upon us, threaten our way of life. As does the extremist nature of this corrupt, incompetent government of the minority.

    I think we may well remove them this winter.

    1. Micky Taking
      September 18, 2021

      shortage of food? what nonsense. Us like Mama Cass are getting fat….(probably sang when you were soiling nappies.)

    2. Original Richard
      September 18, 2021

      Andy : “I think we may well remove them [the government] this winter.”

      Andy, you finally understand and appreciate why a majority voted for Brexit!

      Because of Brexit we can remove this “corrupt, incompetent government of the minority” as you describe them.

      If we had remained in the EU it would be impossible to remove those who make our laws and decide our policies no matter how corrupt or incompetent they are.

    3. NickC
      September 19, 2021

      Worldwide supplies disruption caused by Tory pensioners, says Andy. Thank you for confirming my parody of you.

  35. acorn
    September 18, 2021

    The Treasury deficit equals the domestic private sector surplus (savings) plus the foreign sector surplus (savings), by definition. The foreign sector acquires Pounds Sterling by selling their stuff to us. Most foreign companies will exchange those Pounds for their own domestic currency via their own currency central bank.

    Their central bank ends up with a lot of Pounds (foreign reserves) that are earning no interest. Hence, they buy some Treasury Gilts or some Sterling denominated assets like London property or utilities that are nice little earners; and relatively cheap by global equity standards currently.

    As long as all these foreign holders of Sterling assets are happy to hold on to them, no problem.

    Now, if our government decides it wants our Treasury to run a balanced budget (no deficit, a possible surplus to reduce its cumulative deficits), then the domestic private sector has to go into deficit (spending more than it earns by borrowing), to pay the foreigners for the imports. Alt-wise, if the domestic private sector still wants to save; and, keep buying all those imports, the Treasury has to run a deficit to fund both sectors, by definition.

    The easiest way for a government to reduce its current account deficit (import bill) is to slow down the economy hoping the Muppets don’t notice, by reducing domestic spending power, while trying a lot of import substitutions. Sadly, the UK is unlikely to come up with a substitute for a BMW ALPINA B7. 😉

    1. NickC
      September 19, 2021

      Once again, Acorn, you prove how well you can regurgitate Wikipedia. Once again accounting equivalences say nothing about policy, wealth, utility, productivity, or (political) perceptions. For example, HS2 and other government wheezes, or the fact that EU products are less desirable due to the way the EU treated the UK during the Brexit negotiations. Remember: a government dollar is only worth 50 cents.

  36. Lynn Atkinson
    September 18, 2021

    Crucial that 20% VAT levied on small businesses which are not VAT registered is scrapped ASAP.

    1. glen cullen
      September 18, 2021

      Scrap all VAT

  37. alan jutson
    September 18, 2021

    I see the Government is getting worried about the cost and availability of our gas supply.
    I have to say how ironic given they want us all to dump the use of gas as soon as possible.

    Looks like we are going to have a number of people who are going to have a problem keeping warm this winter, I see food supply and prices increasing too, as well as general inflation, all happening just when they have decided to dump the triple lock.!

    Will anyone in the government feel embarrassed, not a chance.

  38. rose
    September 18, 2021

    It is obvious what is going on: the remainiac Treasury wants to keep everything the same so we can go back in as soon as HMG falls.

    1. Micky Taking
      September 20, 2021

      Not sure HMG will fall, but it certainly is listing towards port. (dedicated to Sea- Warrior).

  39. Sayagain
    September 18, 2021

    The real story here is that Britain and OZ – Boris and Bruce together – birds of a feather – in cahoots have blindsided the French but they have also blindsided the Biden Admin – Slow Joe – it seems –

    With all of the difficulties we have at present time her in UK , with congestion in seaports, shortage of HGV drivers and lack of needed fruit/ vegetable pickers etc I don’t think anything good is going to come out of any of this – especially when the EU and French get their second wind – we know what happens when we play with fire

    1. Micky Taking
      September 18, 2021

      I think Boris, Scott and Biden have just pissed on the French fire.

    2. MiC
      September 18, 2021

      No, I can’t see any possible good coming from it either, and I question the motives of the main players in it all therefore.

  40. Original Richard
    September 18, 2021

    I think deciding our “fiscal rules” on inflation targets and debt interest will be like re-arranging the chairs on the Titanic when we have a government determined to cripple our economy with net zero, relying on feeble and intermittent wind power instead of nuclear for our electricity, spending vast amounts on vanity projects such as HS2 and importing migrants, including thousands of illegal migrants whose purpose in the UK is unknown, to provide cheap labour at the expense of social cohesion.

  41. rose
    September 18, 2021

    Wouldn’t it be good if, in the nick of time, this gas scare could make the Government and people value gas more and insist on securing its supply for the future?

  42. XY
    September 19, 2021

    The Treasury are remoaners. They are also civil servants, therefore pretty useless at the job they’re supposed to be doing.

    But you’re right – a growth target would be better and would likely lead to tax cuts and de-regulation.

    A better question is: how do we get that to happen?

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