The government has published yet another new set of rules on fiscal policy, as chancellor Philip Hammond aims to give himself more room for manoeuvre over the course of the next five years than his predecessor, George Osborne.
The former chancellor watched from the backbenches as Hammond abandoned all three of Osborne’s rules, introduced in 2011. The government is on course to miss all three of the former targets, according to Robert Chote, chairman of the official forecaster, the Office for Budget Responsibility (OBR).
Hammond’s updated Charter for Budget Responsibility, published alongside the Autumn Statement, represents a significant broadening of the Treasury’s goals.
Under the revised charter the Treasury aims to achieve a budget surplus “at the earliest possible date in the next Parliament”. This means abandoning a commitment to balance the books by 2019-20, the end of this Parliament. Instead, the deficit in government spending – cyclically adjusted – will have to be below two per cent of GDP by 2020-21.
Public sector net debt will now only need to fall as a percentage of GDP by 2020-21. It had previously been mandated to fall in every year until then.
And the welfare cap will now only be assessed at the start of the next Parliament, rather than every year.
Although stricter than Hammond's new strictures, Osborne’s rules did make an important distinction between “normal times” and the “period outside normal times”. His rules allowed the government to run a surplus each year once the deficit had been eliminated.
Hammond’s new rules have discarded this terminology completely, focusing rather on returning public finances to “balance”.