New fiscal rule - get borrowing down

David Smith is on excellent form in the Sunday Times today. The old fiscal rules launched in 1997 by an emboldened Chancellor which tried to put in place limits on government borrowing and debt have been blown into the water in the last couple of years. The likely figures for public sector borrowing are quite staggering and the impact will be felt for many years to come. Either state spending has to fall and/or tax revenues have to rise. Given the likely weakness of any economic recovery, we cannot rely on a high enough flow of extra tax income to bring borrowing down - government spending must be cut, and in the labour intensive world of public sector services and administration it can only be through reducing the wage bill that deep cuts can be achieved. “One way or another the public sector’s £158 billion salary bill has to be frozen or reduced. The more public-sector workers resist pay freezes, let alone reductions, the more that burden will fall on jobs.”

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