A new fundamental principle of fiscal policy will ensure that the government will always run a surplus (manifesto, pg 9)
This runs counter to all sensible
economic thought. Countries are not like individuals. Individuals need to cut
back when they don’t earn as much. Sadly, countries suffer from a feedback loop
in which cutting back prevents them earning as much, and so they actually need
a surplus in good times and a deficit in bad times.
This policy is, yet again,
an economic fallacy that will gain emotional traction with uninformed voters,
rather than an open attempt to inform voters of the truth and act responsibly. The
OECD directly says ‘inappropriate
fiscal rules, such as simple balanced budget rules, can be destabilising’. See
point 11 about austerity and the problems of cuts to government expenditure.
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