FAO Tricky - Gordon Brown's rule & implications thereof

1. The rule relates to the ECONOMIC CYCLE not a parliament

2. The rule relates to the PSBR element relating to current expenditure (not the spend re capital items)
being zero at the end of the defined cycle .

3. That means there can still be a PSBR for capital items at any point of the economic cycle.

4. Given 2) and 3) above its quite likely that the national debt will continue to grow as is the case for the next four years according to New Labour forecasts.

5. The definition of the Economic Cycle as to when it starts and ends can be changed ! So whats the point of the rule if it can be manipulated ?

6. In periods of 3% economic growth their should be
a surplus not a borrowing requirement (PSBR). You borrow in downturns and repay when the economy grows.

7. However the truth behind the economy during this last tax year is that the 3.1 % GDP growth was mainly as a result of the PSBR (and the multiplier effect of that PSBR) !!! In addition we should add the growth in PFI liabilities as they are a form of disguised government borrowing. Wonderful the
private sector part of the GDP probably didnt grow at all last tax year.

Posted By: oh arr on May 6th 2005 at 15:32:35

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