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Meeting the fiscal rules?

Explore Gordon Brown's fiscal rules, including the Golden Rule and Sustainable Investment Rule, to maintain a stable and prudent debt level. Learn about current budget balances and the challenges of meeting these rules over economic cycles.

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Meeting the fiscal rules?

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  1. Meeting the fiscal rules? Christine Frayne

  2. Gordon Brown’s fiscal rules • Golden rule • only borrow to invest • receipts must cover current spending • implies surplus or balance on current budget • judged over the economic cycle, not year by year • Sustainable investment rule

  3. A seven year cycle? PBR04: 1999/00 – 2005/06 Source: HM Treasury

  4. A twelve year cycle? PBR04: 1999/00 – 2005/06 PBR05: 1997/98 – 2008/09 Source: HM Treasury

  5. Current budget balance Source: HM Treasury

  6. Meeting the golden rule? “We would meet the Golden Rule irrespective.” Gordon Brown, Evidence to Treasury Select Committee,19th July 2005 Source: www.publications.parliament.uk/pa/cm200506/cmselect/cmtreasy/399/5071902.htm

  7. Meeting the golden rule? Previous estimated cycle

  8. Meeting the golden rule? Source: HM Treasury

  9. Meeting the golden rule?Estimated cyclically adjusted current budget surplus Source: HM Treasury

  10. Gordon Brown’s fiscal rules • Golden rule • Sustainable investment rule • keep debt at a “stable and prudent” level • defined as below 40% of national income • to be met every year in current economic cycle

  11. 40% ceiling Public sector net debt Source: HM Treasury

  12. Conclusion • Treasury expects Golden Rule to be met • Over current cycle due to re-dating of economic cycle • Medium term outlook potentially improved by • £3bn discretionary tax increase • Possible tight control over public spending over CSR 2007, saving £8bn in today’s money • Risks • Is there as much spare capacity in the economy as the Chancellor hopes? • Will receipts materialise? • Will spending be reduced?

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