The Golden Rule Essay

Published: 2020-02-16 23:41:11
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The Golden Rule is a rule that provides a guideline for the operation of fiscal policy. The Golden Rule states that over the economic cycle, the Government will borrow only to invest and not to fund current spending. Therefore, over the cycle the current budget (ie, net of investment) must balance or be brought into surplus. A government study into the long term sustainability of fiscal policy showed that the UKs public finances are broadly sustainable over the long term. And that the UK is also well placed to face future challenges relative to many other developed countries.

Also that the Government can continue to meet the golden rule and the sustainable investment rule throughout the projection period, while allowing current public consumption and public sector net investment to grow at around the assumed rate of GDP growth. Conclusion. To conclude, in the majority of priorities government spending does reflect the priorities and sufficient increases have been made compared to the spending in 2006, and in some cases the government is clearly investing large amounts of money into areas that it sees as crucial for Britains future.

However it would be wrong to say that the governments spending reflects all of its current priorities, as in employment and training government funding has not been increased at all, despite a total of i?? 35billion extra being spent in 2007 compared to 2006, and despite the fact that it is a priority, hence the reason why it is only right to say that the governments budget does reflect its current priorities to a great extent but not totally, there is certainly need for more investment in certain areas.

Although the government aims not to borrow a lot of money, net debt was i?? 512. 4billion at the end of January, compared with i?? 480. 1billion a year earlier. The pre-budget forecast for the net debt at the end of March 2008 is i?? 542. 2billion. this in its self may be a cause of the governments inflation problem, because in theory they are falling victim to the credit crunch just as any other person with large credit card bills etc, however just on a much larger scale.

As one of the main government priorities is to keep unemployment low, they have been investing large amounts of money into training schemes and other projects, this subsequently led to the unemployment rate falling to 5. 2% in February 2008, this was down 0. 2% over the quarter and down 0. 3% on last year. 29. 4million people were in word in the period October to December, this is the highest on record, up by 175. 000 on the quarter and up by 296. 000 on last year.

Unemployment in October to December was 1.61 million (5. 2%) down by 61,000 unemployed on the quarter and down 86,000 from this time last year. this recent drop in unemployment could also be the result of the governments investment in education. This clearly indicates that the government is at least being partially successful in managing the economy, however it is certainly not fair to say that the government is totally successful in managing the economy, with such things as interest rates and inflation on the rise.

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