Britain's prime minister-in-waiting, Andy Burnham, promises radical change while sticking to the country's fiscal rules, a strategy that needs discipline, luck, and maybe an old trick: kicking the pain points into the long grass.
Last week, Burnham committed to existing fiscal rules that require the government to match day-to-day spending against revenue — a balanced current budget — a feat achieved only fleetingly in the last 25 years.
So far, Britain's £2.9 trillion ($3.87 trillion) government bond market has shown little sign of concern, helped by falling oil prices since the de-escalation of the Iran war, but also Burnham's efforts to burnish an image of fiscal responsibility.
But he has yet to set out how he will square demands for spending and borrowing against his commitments to the fiscal rules and the Labour Party's 2024 manifesto, which ruled out raising taxes on working people.
In March, Britain's Office for Budget Responsibility estimated that finance minister Rachel Reeves' plans would meet the rules with a current budget surplus of £24 billion by 2029/30.
But that outlook was based on the economy before the outbreak of war in the Middle East, and above-consensus growth forecasts for the years ahead.
Economists at Bank of America last week estimated that margin had shrunk to £19 billion.
That combination — shrinking headroom and a manifesto that rules out broad tax rises — increases the temptation to do what governments have done before: defer the reckoning.
"The idea that this government might promise fiscal consolidation in the future, while topping up spending plans in the near term, seems quite plausible to me," said Bee Boileau, senior researcher at the Institute for Fiscal Studies, a think tank.
Reeves' reforms to the fiscal framework, including comprehensive spending reviews every two years, have made gaming the fiscal rules harder, but not impossible.
-Reuters
Last week, Burnham committed to existing fiscal rules that require the government to match day-to-day spending against revenue — a balanced current budget — a feat achieved only fleetingly in the last 25 years.
So far, Britain's £2.9 trillion ($3.87 trillion) government bond market has shown little sign of concern, helped by falling oil prices since the de-escalation of the Iran war, but also Burnham's efforts to burnish an image of fiscal responsibility.
But he has yet to set out how he will square demands for spending and borrowing against his commitments to the fiscal rules and the Labour Party's 2024 manifesto, which ruled out raising taxes on working people.
In March, Britain's Office for Budget Responsibility estimated that finance minister Rachel Reeves' plans would meet the rules with a current budget surplus of £24 billion by 2029/30.
But that outlook was based on the economy before the outbreak of war in the Middle East, and above-consensus growth forecasts for the years ahead.
Economists at Bank of America last week estimated that margin had shrunk to £19 billion.
That combination — shrinking headroom and a manifesto that rules out broad tax rises — increases the temptation to do what governments have done before: defer the reckoning.
"The idea that this government might promise fiscal consolidation in the future, while topping up spending plans in the near term, seems quite plausible to me," said Bee Boileau, senior researcher at the Institute for Fiscal Studies, a think tank.
Reeves' reforms to the fiscal framework, including comprehensive spending reviews every two years, have made gaming the fiscal rules harder, but not impossible.
-Reuters
