20 April 2007
Control of crucial UK fiscal policies – including oversight of the current government's 'golden rule' – should be handed over to an independent body, leading economists have urged.
Writing for the centre-Right Policy Exchange think-tank, the economists this week called on the next chancellor to build on Gordon Brown's legacy of an independent Bank of England by establishing a similar fiscal policy committee.
The economists, led by Policy Exchange's research director Oliver Hartwich, believe that the current chancellor has stopped short of creating the ideal environment for a stable UK economy.
The authors praise Brown's self-imposed fiscal rules – which limit government spending and public debt. But they claim that the Treasury's ability to set its own targets and define its own economic cycles is 'too convenient' to ensure long-term economic management unhindered by political influence.
Some critics believe that Brown's prudence has been more illusory than real because he has regularly tweaked the length of the economic cycle to meet his 'golden rule': that over the cycle, the government will borrow only to invest and not to fund current spending.
'Sourcing out both the stewardship of the fiscal rules and the Treasury's economic forecasting to an independent [body] would allow for a truly independent assessment of the government's fiscal policy and the macroeconomic environment in which the fiscal decisions are made,' Hartwich claimed.
The authors want an independent fiscal panel, comprising nine members, to be responsible for compiling the Pre-Budget Report, in which economic forecasts would be made, and for assessing broad government spending plans against Treasury-identified targets.
The intervention by Policy Exchange is the latest call for additional economic policy independence. Writing in Public Finance recently, Ann Rossiter, head of the Social Market Foundation, said: 'This option would enjoy a great deal of public confidence.'
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