Over the next 7 days we will hear a lot about "fiscal rules" . First point: they are not rules. How could they be when they are changed with monotonous regularity? Rather, they are targets, or more correctly, objectives. 1/8
Second point, they only constrain policy for 12-18 months before the consequences of meeting them becomes unpalatable to the electorate and hence to government. At that point, they are suspended and then discarded. 2/8
In the past, governments changed definitions or assumptions in order to meet them. This is no longer a credible option because the independent Office for Budgetary Responsibility calls them out. 3/8
In the end, the markets won't be fooled. And so what matters is the substance. Does HMG have a credible plan for maintaining sustainable public finances over the medium term? 4/8
In the short run, the government can always fund itself. Long term interest rates are at an all time low. 5/8
The UK is well served by the Debt Management office: the average maturity of our debt is 15 years or so. And sensible infrastructure investment is good for productive potential. 6/8
But in the longer term increasing public debt too quickly becomes risky. And it's the younger generation who will foot the bill. That didn't matter when living standards were increasing by 2-3% a year and there was inflation. But as the OBR will confirm those days are gone. 7/8
If low growth persists and inflation is minimal, the baby boomers could bequeath a very high debt service burden. So time to focus on the substance of whether fiscal policy is sustainable, not here today, gone tomorrow, "fiscal rules" 8/8 #soundmoney
