Those golden (chipboard) rules

Alistair Darling has announced that the Government is not going to be applying the golden rule (to keep borrowing below 40% of GDP) and the sustainable investment rule (to balance the books over an economic cycle) rigidly. Well you could blow me down with a feather, the Government stopped following the rules rigidly in 2001 when they started plowing money into this and that.

At first, the Government created PFI projects which took debt off the books (although the future debt will be with us for years). They took the nationalisation of Network Rail off the public books, the nationalisation of Northern Rock and Bradford & Bingley are likely to be taken off too. Public sector pension liabilities have also been removed. If you add all that up the borrowing is well above 100% of GDP. Bye Bye golden rule.

As the Government borrowed more money while the economy was growing, the sustainable investment rule looked under threat. So the Government changed the start point of what is termed the economic cycle. All the while stating that they had got rid of boom and bust, so they really didn't believe that the economic cycle still existed. The present oncoming recession has now changed all that. The economic cycle has reasserted itself - it had never really gone away.

So never mind that the Government didn't understand when the economic cycle started, they didn't understand the economic cycle. Full Stop. Which is why we're in such a mess; investors have decided that UK Plc is a bad bet and are selling Sterling and buying Dollars at a startling rate. Bye Bye sustainable investment rule.

The Government keep saying that the current economic turbulence started in America which is true. Unfortunately they don't say that over the last 10 years, politicians have believed their own statements of "no more boom and bust" and allowed the economy to be built on a house of (credit) cards, it only needed one shock to bring the whole edifice falling down. The US Government bringing down Lehman Brothers was that shock.

The Government is culpable for letting borrowing get out of control in a boom, and they think spending more of our money on the tick is the answer. Borrowing always increases in a recession, but usually from a low base - this time it's from high levels and will need some strict management to get the books balanced again when the economy starts to recover. This Government doesn't understand basic housekeeping, they only understand how to spend other people's money. Will somebody rid us of this turbulent Government?

Squiffy.