Economist Jim O'Neill has urged Britain's incoming leader to adopt a bolder stance on investment-backed borrowing, arguing that strict adherence to a single set of fiscal rules should not be the sole yardstick of fiscal credibility.
O'Neill, a former Treasury minister who has provided advice to Andy Burnham - the politician widely expected to take over as prime minister later this month - said policymakers should consider loosening some existing constraints if that enables productive public investment.
"A lot of fiscal rules get changed pretty easily. And thats because in reality ... the idea that there's one simple way of having fiscal credibility is kind of a bit daft," O'Neill told Reuters in an interview on Monday. He added that he was encouraging those with leadership ambitions to be "bolder - because I don't think these things should be seen as negative."
O'Neill declined to outline concrete policy steps, saying he could not discuss specifics because he had been involved in some "very recent discussions."
The conversation comes as Burnham prepares to assume the premiership, promising significant policy change while publicly committing to the country's existing fiscal rules. Those rules include a requirement that the government balance day-to-day spending with revenue - a balanced current budget - a target that the country has met only fleetingly in the past 25 years.
O'Neill acknowledged that stepping away from established fiscal rules could unsettle financial markets in the near term. Still, he argued that credible, well-explained measures to address Britain's deep-seated structural problems could prompt a meaningful positive reaction from investors and market participants.
On whether the 2024 manifesto of the outgoing party reinforced concerns about fiscal constraints, O'Neill described election manifestos as "sales documents" that can leave governments boxed in once they are in office. "In that case, as it did with previous governments, it just locks them into not being able to do sensible things, all the things that need to probably change," he said.
Since the 1990s, successive UK administrations have imposed limits on borrowing to fund spending deficits and on public debt relative to gross domestic product. O'Neill said he supports enhancing the role of the recently established National Infrastructure and Service Transformation Authority by making it publicly transparent and giving it a formal role in assessing the impact of infrastructure projects.
He suggested that outputs from that authority should feed into the Office for Budget Responsibility's modelling. "The OBR would then simply use that to influence their own scoring on long-term forecasts - and I would hope that a Burnham government is going to pursue something like that," O'Neill said.
When asked if he had been offered any formal role in a future Burnham administration, O'Neill said he had not received any offers.
Implications
- O'Neill's call frames a policy debate between upholding existing fiscal rules and allowing tailored borrowing for investment.
- Greater transparency in infrastructure appraisal could change how long-term costs and benefits are scored by the UK's fiscal watchdog.