Why George Osborne will miss his debt target

Much is being made today of reports that George Osborne will drop his fiscal target in his autumn statement on 5 December. Isabel reported earlier that, faced with breaking his own rule, Osborne will abandon it rather than implement more cuts to meet it. All the fuss seems to stem from a note by Citi Reasearch last Friday. You can read the whole thing here, but here’s a summary.

Like Gordon Brown, Osborne has two fiscal rules. Neither says anything about eliminating the deficit, or even halving it. The first — called the ‘fiscal mandate’ — is ‘to balance the cyclically-adjusted current budget by the end of a rolling, five-year period’. It’s a moving target, simply requiring that at any time the government plans to eliminate the structural deficit within five years. So whereas in the last Budget Osborne had to show the structural deficit at zero by 2016-17, in the next one it only has to get there by 2017-18.