Building an economy of the future: Why the Conservative government needs to change its fiscal mandate

Susan Kramer
Queen Elizabeth II Attends The State Opening Of Parliament
The government needs to realign its fiscal mandate, argues Baroness Kramer (Source: Getty)

Since the Conservative's won their majority government in 2015, our economy has begun to waver.

In the first quarter of this year growth slowed, with construction output falling by 0.9 per cent. The OECD has downgraded forecasts, as has the CBI.

In addition, 10-year gilts hit an all-time low in February and foreign investment is collapsing, with German investment alone tumbling by more than 40 per cent last year.

Some of this is down to the very real threat of a UK exit from the EU. However, a lot of it is also of the government’s own making.

Public sector borrowing

One of the first things they did on coming into power was to impose a fiscal mandate that requires the elimination of all public sector borrowing by 2020/21.

The move was intended as a political trap for the Labour Party, but has seriously backfired, binding the Government’s hands, forcing them to cut back even further on capital spending and investment in infrastructure.

Read more: Osborne's budget target leaves "limited fiscal flexibility", says Fitch

That means we cannot invest in our future. It means we are not taking advantage of historically low interest rates to build the homes, roads and digital infrastructure we need to remain competitive in the next decade.

It means that the economy we will hand to the next generation will be significantly less stable than the one we inherited.

Building an economy of the future

With this in mind, it’s no wonder that 47 per cent of people under 35 believe that they will have a worse quality of life than their parents.

If we want to build the economy of the future, we have to ensure that no party can run our economy for short term political gain.

That is why today week I have introduced a Private Member’s Bill in the House of Lords to change the way the government decides its fiscal mandate.

Read more: Economists slam Osborne's spending plans

Under my Bill, for the first time, the Government would be legally required to consider the need for continued investment in infrastructure and the impact of its spending plans on intergenerational fairness.

They would be required to consult with independent experts in order to deliver a plan that serves the long term sustainability of the economy, not one that panders to their own political bent.

When he defended his decision to cut inheritance tax, George Osborne said that the wish to pass on something to your children is "the most basic, human and natural aspiration there is".

It’s time the Government acted with the same aspiration for our country.