A Consideration of Fiscal Targetry

Jagjit S. Chadha

National Institute of Economic and Social Research (NIESR) Topical Briefings, 2024, issue 14

Abstract: We are looking for the competent management of the public purse by the government in conjunction with the civil service under the watchful eyes of media, press, research bodies and the markets. An overview of the government balance sheet, the changes since the previous year and how it is both sustainable in terms of the market demand for gilts but also in terms of tax revenues required in excess of the returns from any assets held, would lead to a better set of choices over time. A State of the Economy address, that enables us to assess and gauge our national progress every year at the main fiscal event, would hold the Chancellor to account for economic performance. The UK's current set of fiscal rules are not fit for purpose. They are more "honor'd in the breach than the observance". They have clearly introduced an unintended incentive on the margin (code for at fiscal events) to trade off government investment for government consumption. They have led to a trivialisation of the fiscal policy debate centred on arbitrary fiscal space in a manner previously described as Budgetarian. And taken attention away from the failures of economic policy, which on their own assessment of the OBR have significantly damaged potential output, leading to a more inflation prone country and one that has developed a structural fiscal deficit.

Date: 2024-10
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