|
 |
| The Times, 23 January 2006 |
|
| A labour-dominated Commons committee is to rebuke Gordon Brown this week by calling for a review of the fiscal rule that underpins his economic strategy. |
|
|
|
| The Treasury Select Committee will report that the operation of the Chancellor's "golden rule" should be reviewed because since the general election the Treasury twice has extended the economic cycle over which the rule runs, The Times has learnt. |
|
|
|
| The move reflects growing cross-party unease in Westminster at the flexibility of the fiscal rules and is in line with the widespread view in the City that the framework on which Mr Brown bases them has been discredited. |
|
|
|
| The veiled attack on the Chancellor is understood to have been agreed last week and will be contained in the committee's report on the Pre-Budget Report on Wednesday. |
|
|
|
| It was at a Treasury Select Committee hearing in July that Mr Brown first announced that the economic cycle began not in 1999 but in 1997. The adjustment dramatically improved his chances of meeting his golden rule -that the current budget must be in balance or surplus over the economic cycle -because it added two years of surpluses to the calculation. |
|
|
|
| Committee members att-acked the move. Susan Kramer, the Liberal Democrat, accused the Government of "marking its own exam papers". In December's Pre-Budget Report, Mr Brown again extended the cycle, adding three years to its original estimated end, which was March this year. The Treasury's view is now that the economic cycle will last twelve years, not seven as estimated as recently as last March. |
|
|
|
| Last month committee members across the political divide weighed into the Chancellor. Andy Love, a Labour member, suggested that Mr Brown consider what options he had to improve the fiscal framework. He asked: "Are you worried at all that changes in the economic cycle might cast doubt on the credibility?" |
|
|
|
| David Ruffley, a Conservative, accused Mr Brown of "fudging and fiddling the figures" and urged him to follow the National Audit Office's recommendation that the Treasury revise its processes by compiling an assessment of external observers' views of the economic cycle. |
|
|
|
| Michael Fallon, also a Conservative, accused Mr Brown of having been over-optimistic on each of his five most recent budget projections. |
|
|
|
| The golden rule has been widely seen in the City as in need of reform since Mervyn King, the Governor of the Bank of England, attacked it last August. Mr King said that the extension of the economic cycle did not change the underlying fiscal position, adding: "We don't like this sort of fixed dating. I am not even sure whether it makes sense to think about the cycle as a well-defined phenomenon." |
|
|
|
|
|
