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Treasury may relax fiscal rules Treasury may relax fiscal rules
(about 1 hour later)
The government is considering re-writing its own rules on how much it can borrow in order to counter the effects of the economic slowdown.The government is considering re-writing its own rules on how much it can borrow in order to counter the effects of the economic slowdown.
The new framework, which will could be announced in the Autumn pre-Budget statement, would permit more borrowing as an alternative to increasing taxes.The new framework, which will could be announced in the Autumn pre-Budget statement, would permit more borrowing as an alternative to increasing taxes.
The Tories say such a move would be final nail in the coffin of Gordon Brown's reputation for prudence.The Tories say such a move would be final nail in the coffin of Gordon Brown's reputation for prudence.
But the Treasury stressed no decision had yet been taken.But the Treasury stressed no decision had yet been taken.
BBC political editor Nick Robinson said officials were drafting a looser framework so that the Treasury would not have to break the present borrowing limit of 40% of national income.BBC political editor Nick Robinson said officials were drafting a looser framework so that the Treasury would not have to break the present borrowing limit of 40% of national income.
The rules were laid down by Mr Brown as Chancellor after Labour came to power in 1997.The rules were laid down by Mr Brown as Chancellor after Labour came to power in 1997.
He repeatedly staked that reputation on his fiscal rules and now we're told that the Treasury is having to re-write the rules Conservative Party spokesman Send us your commentsHe repeatedly staked that reputation on his fiscal rules and now we're told that the Treasury is having to re-write the rules Conservative Party spokesman Send us your comments
But it is predicted these will be breached as the government faces an £8bn tax revenue shortfall because of the current economic climate. It is predicted these will be breached as the government faces an £8bn tax revenue shortfall because of the current economic climate.
The Treasury said the news, which was first reported in the Financial Times, was "pure speculation, based on comments that are over three months old".The Treasury said the news, which was first reported in the Financial Times, was "pure speculation, based on comments that are over three months old".
A spokesperson said: "We have made consistently clear [for some time now] that we will set out the fiscal rules for the next economic cycle at the end of the current cycle."A spokesperson said: "We have made consistently clear [for some time now] that we will set out the fiscal rules for the next economic cycle at the end of the current cycle."
'Stark choice''Stark choice'
The BBC's political editor said Gordon Brown, first as chancellor and then prime minister, had promoted his fiscal rules as evidence of the prudent way in which he was running the economy.The BBC's political editor said Gordon Brown, first as chancellor and then prime minister, had promoted his fiscal rules as evidence of the prudent way in which he was running the economy.
BBC political editor Nick Robinson gives his assessmentBBC political editor Nick Robinson gives his assessment
But the behind the scenes re-drafting of the rule limiting the amount of government borrowing comes as tax revenues are shrinking because of the slowdown on the High Street, the stalling of the housing market and the drop in company profits.But the behind the scenes re-drafting of the rule limiting the amount of government borrowing comes as tax revenues are shrinking because of the slowdown on the High Street, the stalling of the housing market and the drop in company profits.
Our correspondent said: "Do nothing and the government would be faced with a stark choice - tax us more to make up the shortfall or borrow more and break their fiscal rules."Our correspondent said: "Do nothing and the government would be faced with a stark choice - tax us more to make up the shortfall or borrow more and break their fiscal rules."
He added it was "politically significant as well because it would be hugely difficult for any chancellor at a time like this when the government's ratings are so low, to add to people's economic problems by charging them even more".He added it was "politically significant as well because it would be hugely difficult for any chancellor at a time like this when the government's ratings are so low, to add to people's economic problems by charging them even more".
Responding to the reports, a Conservative Party spokesman said: "If this is true, it puts the final nail in the coffin of Gordon Brown's reputation for economic competence.Responding to the reports, a Conservative Party spokesman said: "If this is true, it puts the final nail in the coffin of Gordon Brown's reputation for economic competence.
"He repeatedly staked that reputation on his fiscal rules and now we're told that the Treasury is having to re-write the rules because the government has lost control of the public finances.""He repeatedly staked that reputation on his fiscal rules and now we're told that the Treasury is having to re-write the rules because the government has lost control of the public finances."
Liberal Democrats Treasury spokesman Vince Cable said the government would in effect be acknowledging that it could not keep its own rules on public debt.Liberal Democrats Treasury spokesman Vince Cable said the government would in effect be acknowledging that it could not keep its own rules on public debt.
He said the success of the Bank of England's control of monetary policy held lessons for the Treasury and it was time to establish an independent body to scrutinise fiscal policy.He said the success of the Bank of England's control of monetary policy held lessons for the Treasury and it was time to establish an independent body to scrutinise fiscal policy.
"This step underlines what I and my colleagues have said for years, the assessment of fiscal policy must be made by an independent body in the same way interest rates are determined," he said."This step underlines what I and my colleagues have said for years, the assessment of fiscal policy must be made by an independent body in the same way interest rates are determined," he said.