Golden rule boost for Chancellor

Chancellor Gordon Brown has been given a £2.1bn boost in his attempts to meet his golden economic rule, which allows him to borrow only for investment.

The extra leeway came after the Office for National Statistics said it had been measuring road expenditure data wrongly over the past five years. It comes just weeks ahead of the Budget and an expected general election. Shadow chancellor Oliver Letwin said: "At best the timing of these changes is very convenient for the government."

A review by the ONS found it had made a mistake by "double counting" some spending on roads since 1998/9. Correcting the error would mean reducing current expenditure and increasing net investment, thus helping Mr Brown to meet his "golden rule" of borrowing only to invest over the economic cycle. Economists speculated that it might also allow for some vote-catching measures in the Budget.

The changes by the ONS increase the current budget measure for the past five years by £2.1bn in total. Mr Letwin said: "This is a very murky area... There will inevitably be suspicions that the figures are being fiddled." The Conservatives also said Mr Brown would still be forced to raise taxes after the general election to fill an annual £10.5bn "black hole" in the nation's coffers. But the Treasury said there would be no relaxation of economic discipline and the golden rule would be met even without the data revisions.

In January the independent Institute for Fiscal Studies (IFS) said Mr Brown would need to raise taxes to get public finances onto the track predicted in last year's Budget. It also said the government might narrowly miss its "golden rule" if the current economic cycle ended in 2005/06. After the ONS announcement, economists said there could also be a proportionate boost to the current budget in 2004/05 of about £400m. "None of this changes the big picture of a dramatic deterioration in the overall fiscal position over the last four or five years," said Jonathan Loynes, chief UK economist at Capital Economics. "Accordingly, it seems very likely that some form of fiscal consolidation will be required in due course."
