Rewriting the rules
- 18 Jul 08, 10:10 AM
"Them fiscul rools" is not a phrase heard often down the "Dog and Duck". No matter. The rewriting of the rules flourished so often by Gordon Brown to prove his prudence will have a real impact on the man and woman in the pub or at the water-cooler.
It will make it easier for the government to justify not putting up our taxes in the year to come and almost inevitable that they'll have to rise after that.
No wonder an economist told David Cameron at a Tory economic summit yesterday that "the next election is the one to lose".
The rule that matters in this story is the one that places a self-imposed limit on the amount the government can borrow. This year it's sure to be broken because the flow of taxes into the Treasury's coffers is drying up and they have nothing saved for this very rainy day.
Ministers could hike taxes to deal with the problem. They could slash spending. They prefer, of course, to borrow more. Rewriting the rules will allow them to do just that.
They will, of course, argue that there's an economic case for not taking money out of people's pockets or cutting public spending at a difficult time. This will be countered by those who say it is the job of the Bank of England using interest rates to ensure that the economy's not too hot and not too cold but just right.
This news poses real questions for all the parties:
Are Labour prepared to keep borrowing regardless of the fact that one day we'll all have to pick up the tab? Or could Alastair Darling behave as former Chancellors Ken Clarke and Roy Jenkins did - putting up taxes because they believed it was the economically right thing to do at the obvious political cost?
Will the Tories now make the case for a potentially unpopular combination of tax rises and spending cuts rather than the vote garnering tax cuts and spending rises?
Can the Lib Dems plausibly criticise the government for behaving as if there's "a pot of gold" to pay for tax cuts whilst themselves promising to cut the overall tax burden?
These are changed times, interesting times, defining times.
