Labour Declares Impotence and Castration recently published this leaflet, explaining how their Fiscal Credibility Rule would work. Briefly they explain that:

-Labour will close the deficit on day-to-day
spending over five years.
-Labour make sure government debt is falling
at the end of five years.
-Labour will borrow only to invest.

If they insist on this needless self-imposed constraint (a capped budget rule), the only way the Government can bypass it, is if it does investment spending through a publicly owned bank & extends to that bank loan guarantees. The Government will only pay up if the public bank cashes in those loan guarantees, which it won’t, if the public bank issues loans based on prudent considerations for projects that benefit the real economy. In other words, the bank would only cash in the loan guarantees if the loans (the bank’s assets) go bad.

The loan guarantees would or could be counted in the national debt (albeit it’s not necessary), but not in the Government’s net fiscal position. But since Labour wants to also shrink the national debt, they are essentially putting the country in a straight-jacket. They won’t be able to carry out projects for public purpose and will betray their voters who expect results now, not half-measures that benefit primarily the rentier class and trans-national capital at the expense of everyone else.

Here is Alan Greenspan, on the tele, in parliament, explaining that the real constraint is the availability of physical resources, NOT money.

Serban V.C. Enache is a Romanian journalist and indie author. Though interested in history, politics, and economics, his true passion is for medieval fantasy fiction.