Friday, 18 July 2008

The Passing of Prudence

According to the press and confirmed by the Treasury, talks are underway to reform the fundamental fiscal rules to allow more government borrowing. At the moment public finances are stretched an awful lot and are in serious risk of breaking the rules altogether (it can be argued that these rules have already been broken, and I would agree, but strictly speaking they havent).

The Government seems to ignore the fact that it is simply spending too much money. Its spending binge in the last handful of years has been paid for by the surplus of years before that and then by borrowing even though the clouds were coming in. Allowing itself another line of credit is going to lead to a further weakening of public finances because at some point, that borrowing will have to be paid for and itll have to come out of future tax receipts for example. The coming Pre Budget report is going to be even more important now. The Government must realise that borrowing so much money to fund such profligance is irresponsible and tighten its own belts before asking for more.

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