The Golden Rule in The United Kingdom
The Golden Rule was one of several fiscal policy principles set out by the incoming Labour government in 1997. These were first set out by then Chancellor of the Exchequer Gordon Brown in his 1997 budget speech. Subsequently they were formalised in the Finance Act 1998 and in the Code for Fiscal Stability, approved by the House of Commons in December 1998.
In 2005 there was speculation that the Chancellor had manipulated these rules as the treasury had moved the reference frame for the start of the economic cycle to two years earlier (from 1999 to 1997). The implications of this are to allow for £18 billion - £22 billion more of borrowing.
The Government's other fiscal rule is the Sustainable investment rule, which requires it to keep debt at a "prudent level". This is currently set at below 40% of GDP in each year of the current cycle.
As of 2009, the Golden rule has been abandoned.
Read more about this topic: Golden Rule (fiscal Policy)
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