The golden rule, formulated by the Chancellor in 1998, stipulates that the current budget must be in balance over the economic cycle as a whole. This means current spending must be paid for out of tax revenue alone. This has been a valuable tool in achieving a balanced budget and financial stability. But Mr Brown, however strong the technical arguments for the change, seems now to be shifting the goal posts. This latest manoeuvre will give him some £10bn extra to spend and ensure taxes will not have to rise next year. But is this a responsible approach to fiscal policy? The time has surely come for the golden rule to be subject to an independent assessment. The financial markets must have confidence that the Government's spending figures are not being manipulated.
The Chancellor also revealed yesterday that next year's scheduled comprehensive spending review will be postponed until 2007. This has been portrayed as a "power grab" by Mr Brown - a way of preparing the economic ground for his anticipated succession as Prime Minister. But this decision could also be interpreted as a sign of weakness. Holding a spending review next year would highlight the fact the Chancellor has considerably less money to play with than in previous times. And by postponing the review, Mr Brown has ensured that his planned squeeze on public spending, scheduled to begin in 2006, cannot be challenged by various government departments.
Mr Brown has been an extraordinarily successful Chancellor over the past eight years. But cracks are beginning to appear. His flagship tax credit scheme wrongly handed out £2bn last year - and that sum now has to be recovered. Tax receipts are beginning to fall below expectations, as the global economy slows. Concerns over public sector productivity have prompted the Office for National Statistics to devise a new independent method of measuring it. All of this could damage not only the Chancellor's reputation but his chances of succeeding Tony Blair as Prime Minister.
Mr Brown is said to be fond of remarking: "There are only two sorts of chancellors - those who fail and those who get out just in time." The most pressing task he now faces is to ensure he does not fall into the wrong category.Reuse content