George Osborne’s two fiscal rules have been around since his very first Budget, delivered almost two years ago, so they’re hardly news. But they do underpin much of what he’s done since, including last week’s statement, so they’re also worth knowing about. Fraser touched on ome of the detail in a post last weekend, but here’s a supplementary guide for CoffeeHousers:
1) The deficit rule. This is the one that seems to cause the most confusion, perhaps because it has often been simplified — wrongly — as something like ‘eliminate the deficit by the end of this Parliament’. Fact is, the ‘end of this Parliament’ doesn’t come into it. And as for ‘eliminating the deficit’, it depends on what ‘deficit’ you’re talking about.
The actual rule, as the Office for Budget Responsibility describes it, is to:
‘Balance the cyclically-adjusted current budget (CACB) by the end of a rolling, five-year period.’
So what does it mean? The first thing to note is that the CACB is what Osborne calls the ‘structural deficit’.
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