Full fiscal autonomy
Think tank: Social Market Foundation
Author(s): Aveek Bhattacharya
October 17, 2022
This report from UK think tank the SMF looks at making the democratic case for independent fiscal policy.
This briefing makes the case for establishing an independent body to determine fiscal rules for the Treasury – to allows us to restore credibility in UK economic policymaking and try and secure greater stability in the years ahead. Despite recent challenges to the Bank of England’s independence, over-politicisation of fiscal policy is a greater threat to UK economy than empowering technocrats – and an independent fiscal body could avoid the sort of damaging conflict with the Bank of England we have seen, with fiscal and monetary policy pulling in different directions. The SMF calls on the Government to set up a Fiscal Policy Committee (FPC) that would set the government budget and tell them how much they can borrow, leaving the Chancellor and ministers to decide how to meet the targets and rules set by the FPC. Beyond a restoration of UK credibility and better economic outcomes, it could also encourage political and democratic debate to focus on more fundamental economic questions, such as how to improve innovation, productivity and investment in a sustainable and equitable way.