Having just read Sam Fleming and Mary McDougall’s report about bond losses suffered by the Bank of England (“UK can adjust debt rule to ease impact of BoE losses, say traders”, Report, July 17), one has to commend the genius of 21st-century British economic policy.
First adopt an arbitrary debt to gross domestic product cap. Then ask the newly formed Office for Budget Responsibility to forecast — conditional on announced economic policy — whether the debt target will be reached. To which the answer is typically yes. Sub-clause: if not, change the rule.
Then stand well back and watch debt to GDP rise inexorably to 100 per cent, alongside a fall in the quality of the provision of public goods, as the revenue base erodes and the spectacular stall in living standards creates a structural fiscal deficit. And finally, as a coup de grâce, in order to allow room for much needed public expenditure within the existing fiscal rule, seek to redefine net debt so that some items of debt can be excluded from the count. We are now in danger of turning an economic tragedy into a fiscal farce.
Jagjit S Chadha
Director, The National Institute of Economic and Social Research
London SW1, UK
