By Allister Heath, includes “Britain faces two separate but related fiscal crises. In the short-term, the budget deficit is growing again, rather than shrinking, in defiance of almost every prediction and despite strong GDP growth. This is threatening to derail George Osborne’s ambitious and welcome plans to cut taxes meaningfully over the next few years. In the long-run, ever-rising demand for many of the services provided by the welfare state, combined with economic and demographic trends, will put immense pressure on the public finances. It is this latter issue that the Institute of Economic Affairs (IEA) addresses in a new report by Philip Booth and Ryan Bourne, which makes devastating reading. … The Government, by contrast, has no such constraints and continues to make fiscally disastrous promises with abandon, undisciplined by basic accounting practices. The state puts no assets aside to pay for future pensions and health promises; instead, its “sums” and “budgeting” are predicated on the hope that there will be enough children or migrants that pay enough tax to finance the politicians’ pledges. Shifts in longevity, ageing dynamics, higher healthcare costs and the like are simply brushed aside. All of this is nonsense. Governments must face the same discipline as companies and must recognise commitments to future generations as soon as they are made. The best fiscal constitution is one that is grounded in accounting rules, rather than in politics. Gordon Brown thought that he could assuage financial markets by adopting a series of supposedly strict fiscal rules; yet as soon as he was about to break them he promptly rewrote them. If the Tories want to prove that they are truly serious when it comes to tackling the national debt, they should promise that the next government would legally bind itself to adopting private sector rules for its national accounts. All pledges would have to be costed; all promises accounted for. If nothing else, the reform would certainly focus attention on Britain’s fiscal timebomb.”
Read the full article on: The Telegraph (UK)