UK fiscal regime should be reformed by Brown's replacement - IFS |
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Wed, 31 Jan 2007 11:17
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LONDON (AFX) - The next Chancellor of the Exchequer has a golden chance to restore credibility to the government's bruised fiscal regime, a leading think-tank said today.The Institute for Fiscal Studies reckons that Gordon Brown's successor at the Treasury -- candidates are thought to include Trade Secretary Alistair Darling and Ed Balls, Brown's closest economic advisor -- should seek to restore the credibility of the decade-old fiscal rules as a matter of urgency.The IFS said Brown, widely tipped to become Prime Minister in the summer when Tony Blair quits, will declare 'victory' in meeting the golden rule of balancing the budget, excluding investment, across the economic cycle, when he delivers what is expected to be his final budget in March or April.'The expected arrival of a new Chancellor later in the year creates a golden opportunity to improve the fiscal rules and restore lost credibility,' the IFS said in its annual Green Budget, published ahead of the actual one.'This could legitimately be presented as building on Brown's original vision and applying lessons from the widely-hailed success of his framework for interest rate policy,' it added.Brown has come under fire for allegedly manipulating the date when the economic cycle ends in such a way as to meet the golden rule.The Treasury recently said the cycle started in 1997/98 and will probably conclude in the current financial year. The massive surpluses reported in the early years gives the Treasury scope to meet the golden rule to the tune of some 7 bln stg, the IFS said.Had the new economic cycle started in 2003/4 and run to around 2009/10, as calculated by Morgan Stanley, the Green Budget's co-authors, then the golden rule would have been broken by at least 57 bln, it added.'By re-dating the economic cycle at a uniquely convenient moment, and delaying tax increases and spending cuts until just after the election, the Chancellor appears to have eroded the credibility of his fiscal rules as a meaningful constraint on his tax and spending decisions,' the IFS said.The IFS argues that the golden rule should be symmetric, forward-looking and less reliant on the ability to identify economic cycles precisely.'The Treasury's forecasting of the public finances should also be made more transparent or perhaps even delegated to an independent body that would not be suspected of massaging the figures,' it added.pan.pylas@thomson.compp/roCOPYRIGHTCopyright AFX News Limited 2006. All rights reserved.The copying, republication or redistribution of AFX News Content, including by framing or similar means, is expressly prohibited without the prior written consent of AFX News.AFX News and AFX Financial News Logo are registered trademarks of AFX News Limited
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Brown certain to raise taxes from oil & gas companies, warn auditors 