"If Gordon Brown was the chief executive of a public company, he would be out on his ear," Simon Nixon says on Breakingviews.com. Treasury plans to rewrite Brown's fiscal rules prove that Labour cannot be trusted with the nation's finances.
Maybe not, says Irwin Stelzer in The Daily Telegraph. But Brown's fiscal rules that public sector debt shouldn't exceed 40% of GDP and that the Government should borrow only to invest over the course of the economic cycle should be seen for what they were; a "valuable fiscal policy tool in the early days of New Labour".
In reality the rules were "scotched long ago" by Brown's juggling of the timing of business cycles and "Enron-style definitions of what is considered government debt" and that is no bad thing. No fiscal 'rule' is appropriate in all economic circumstances. After all, a "limit on borrowing that is appropriate when the economy is booming might turn a mild downturn into a recession".
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So how bad are the figures? The Treasury was already "sailing horribly close to the fiscal wind" at the last Budget, says Andrew Rawnsley in The Observer. Since then, Alistair Darling has spent £2.7m he didn't have to defuse the revolt over the 10p tax band and has just lost another £500m by scrapping the 2p rise in fuel duty. And less money is coming in. Stamp duty, corporation tax, VAT and income tax are "following the economy down". No wonder debt is heading for £57bn and up.
Yet Brown still can't stop spending, says Liam Halligan in The Sunday Telegraph. Between April and June, spending was up 7% on a year ago. Under Labour, the size of the state has ballooned from 37% to 42% of GDP; most Western nations have "sensibly been going in the opposite direction". The official figure for government debt is now 38.3%, but if you include the 'temporary' Northern Rock liabilities we exceed 44%. Add in the debts incurred under the Private Finance Initiative and we exceed 46% and that's without our "massive" public-sector pension liabilities.
That figure isn't so bad, says Will Hutton in The Observer. The authors of the Maastricht Treaty thought they were being "ultra-tough" when they limited the public debt of eurozone members to 60% of GDP. The rise in public spending was both affordable and vital. Where Brown went wrong was by lowering income tax and creating an economic stick his fiscal rules "to be beaten with for no good reason". The way to mitigate the downturn is to raise public spending and borrowing and then raise taxes.
Excuse me, asks Halligan, how about spending less? A "final desperate spending binge" might shore up Labour's core public sector vote before the next election, but it would be deeply damaging for the economy. It would, agrees Stelzer. "To avoid fuelling the inflationary expectations that are produced by out-of-control borrowing and to prevent a slide in sterling, a credible long-term plan for reducing borrowing as the economy recovers is essential." That means turning down the "spending spigot" and redirecting money away from "wage-inflating gifts to the unions" to productivity-enhancing activities.
Finally, the way fiscal rules are monitored must be changed and an independent body should decide what goes on the government's books in the debt column. There's one other thing, says Nixon. Brown the architect of this mess "must go".
Emily has extensive experience in the world of journalism. She has worked on MoneyWeek for more than 20 years as a former assistant editor and writer. Emily has previously worked on titles including The Times as a Deputy Features Editor, Commissioning Editor at The Independent Sunday Review, The Daily Telegraph, and she spent three years at women's lifestyle magazine Marie Claire as a features writer for three years, early on in her career.
On MoneyWeek, Emily’s coverage includes Brexit and global markets such as Russia and China. Aside from her writing, Emily is a Nutritional Therapist and she runs her own business called Root Branch Nutrition in Oxfordshire, where she offers consultations and workshops on nutrition and health.
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