Stop tinkering with austerity, Chancellor

The Government is continuing to spend way beyond its means. George Osborne must be more honest about the challenge ahead The Chancellor George Osborne will have to concede in the Autumn Statement that one of his rules – that debt will be falling as a proportion of GDP by the end of the parliament – will not be met Photo: Reuters By Telegraph View

8:26PM GMT 04 Dec 2012

Rules are there to be obeyed, right? Not, it seems, when it comes to UK fiscal policy, where a different dictum reigns supreme – that rules are there to be broken. Two and a half years ago, the new Coalition Government announced what was meant to be a clean break with the past, a supposedly robust set of instructions and institutional arrangements for restoring fiscal sustainability and getting on top of Britain’s debts.

After the profligacy of the Brown years, when Labour’s regime for keeping the public finances on the straight and narrow was manipulated to destruction, it seemed like a breath of fresh air, and undoubtedly helped to save Britain from the almost certain loss of its triple-A credit rating. Yet with growth falling well short of expectations, the Coalition is now struggling to meet its own disciplines, and it may well be that the Chancellor will have to concede in today’s Autumn Statement that one of his rules – that debt will be falling as a proportion of GDP by the end of the parliament – will, in the view of the Office for Budget Responsibility, now not be met. The goal of balanced budgets is also widely expected to be shifted a further year into the future. If these outcomes are avoided, it will only be because of quite optimistic assumptions about future growth or the use of accounting trickery.

There is a reasonable argument to be had over whether the Chancellor’s chosen rules were ever the right ones for guaranteeing fiscal sustainability, and there are of course plenty of excuses for why they are not being met, not least the eurozone crisis and rising energy prices. Yet the fact is that the Government is continuing to spend way beyond its means. Britain is a persistent offender in this regard, having in only six of the past 34 years, according to a recent report by the think tank Reform, managed to achieve a budget surplus big enough to reduce its debt mountain.

The Chancellor must be much more open and honest about the scale of the challenge facing the public finances, and set out a clearer set of objectives and sanctions for ensuring that it is adequately faced up to. Recent economic research has produced powerful evidence to suggest that once public indebtedness reaches levels of 85 to 90 per cent of GDP, it begins seriously to affect enterprise and the economy’s ability to grow. Britain is fast approaching this threshold, and will soon be through it unless further action is taken to reduce bloated public spending. The Chancellor must stop tinkering with the austerity programme and commit to a more robust and urgent plan for putting the public finances back on a sustainable footing.

Watch the Autumn Statement live with reaction and analysis from the Daily Telegraph's deputy editor Benedict Brogan and the Telegraph's Head of Business Damian Reece, from 12.20pm.
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