Designing fiscal rules

Date: 01 January 2009
Contacts: Carl Emmerson , Robert Chote , Rowena Crawford and Gemma Tetlow
The 'golden rule' and 'sustainable investment rule' were adopted by the Chancellor, Gordon Brown, in 1997 to monitor the government's finances. IFS researchers assessed the strengths and weaknesses of these rules, both in terms of the variables they sought to target and the time periods over which they did so. We saw them as reasonable rules of thumb, but argued that changing the start date from which the golden rule was assessed at a particular convenient moment undermined its credibility. We argued for a more forward-looking approach. Following the abandonment of these rules after the credit crunch, the Government and Opposition parties both adopted more forward looking objectives - albeit with their own weaknesses.