12 March 2020

A Better Fiscal Rule

Neville Hill, Credit Suisse
Toby Nangle, Threadneedle Asset Management

Fiscal rules have never been so prevalent among nations, but most fiscal rules fall victim to charges of ineffectiveness, over-complexity, asymmetry and harmful pro-cyclicality. The succession of fiscal rules - national and supranational - to which the United Kingdom has made itself subject since 1992 are no exception. We argue for a new fiscal rule that might help secure fiscal credibility that is intuitive, counter-cyclical and potentially symmetrical.