The Chancellor is first and foremost the guardian of the people's money. But during the 1990s the national debt has doubled. This year alone the taxpayer will pay out 25 billion in interest payments on debt, more than we spend on schools. Public finances must be sustainable over the long term. If they are not then it is the poor, the elderly, and those on fixed incomes who depend on public services that will suffer most. So, as with our approach to monetary policy, so in fiscal policy: we will now establish clear rules, a new discipline, openness, and accountability.I have this image of Gordon Brown arriving back from his trip to the sunny climes of South America telling the waiting media: "Crisis? What crisis?"
My first rule - the golden rule - ensures that over the economic cycle the Government will borrow only to invest and that current spending will be met from taxation. My second rule is that, as a proportion of national income, public debt will be held at a prudent and stable level over the economic cycle. And to implement these rules, I am announcing today a five year deficit reduction plan.
Together, these rules and this plan will ensure a historic break from the short-termism and expediency that have characterised the recent fiscal policies of our country. As with our monetary policy, our fiscal policy will be all the more credible for being open and accountable.
Any Budget seeking to achieve high and stable levels of growth and employment must be guided by the true state of the public finances, but also by a clear assessment of the state of the economy. And to that I will now turn.
We have seen a rapid growth of consumer spending, of nearly 4 per cent over the last year. With the prospect of further windfalls' from the building societies, consumer spending is likely to remain strong. There has been a sharp rise of 7 to 11% in house prices, with even higher rises in the South East.
The growth of average earnings has accelerated to 4.5% a year. The rate of broad money growth has been, around 10% for a year. These increases in consumer spending, earnings, and money supply are continuing even as industrial production and manufacturing output have been recovering only slowly.
It is essential that consumer spending is underpinned by investment and industrial growth. Britain cannot afford a recurrence of the all too familiar pattern of previous recoveries: accelerating consumer spending and borrowing side by side with skills shortages, capacity constraints, increased imports and rising inflation.
Already there are warning signs that this pattern could be repeated. In similar circumstances some of my predecessors have ignored these signs while others have deluded themselves into believing that growth, however unbalanced, was evidence of their success. I will not ignore the warning signs and I will not repeat past mistakes.
Thursday, March 26, 2009
Gordon With Hindsight
This is an excerpt from Gordon Brown's first budget speech in 1997. It makes rather interesting reading in retrospect...