Magazine article Public Finance

Treasury Rules, OK?

Magazine article Public Finance

Treasury Rules, OK?

Article excerpt

Gordon Brown's cherished sustainable investment rule is clinging to life, Rasputin-style, despite repeated attempts to kill it off.

The rule, requiring that public sector net debt be kept below 40% of national income, has been under threat for some time. With the expected addition of£100bn of Northern Rock liabilities and £30bn from Private Finance Initiative projects there seemed little hope.

And yet, the humiliating U-turn predicted for next week's Budget no longer seems likely. Chancellor Alistair Darling has received some unexpectedly good news and the prognosis for the rule is much improved.

Strictly speaking, Northern Rock will push the debt figure beyond 40%. But experts have argued that the temporary nature of the transfer means the rule should be applied without these liabilities. The Treasury will no doubt concur.

Similarly, Whitehall's move to International Financial Reporting Standards, and the consequent inclusion of PFI debts, would have brought the government perilously close to its self-imposed limits. However, the Financial Reporting Advisory Board this week confirmed that it is recommending a 12-month delay in implementation.

So the rule could have a stay of execution of at least a year. …

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