Fiscal Credibility Rule (FCR)

Sergeant Simon Wren-Lewis of the Status Quo Squad, saying "Move along! Nothing to see here!"

Is Labour’s fiscal policy rule neoliberal? That is the charge some on the left, particularly followers of the Modern Monetary Theory (MMT) movement, have laid against Labour’s fiscal credibility rule (FCR). MMT stands for nothing very informative, but it is a non-mainstream macroeconomic school of thought aligned to the left. Bill Mitchell, one of the leading lights of MMT, has run a relentless campaign against the FCR through his blog. As my own work with Jonathan Portes helped provide the intellectual foundation for the FCR, I will try and explain why I find the charge of neoliberalism nonsensical.

A reminder to self that the difference between Corbyn and Starmer was, in this respect at least, not as great as I may have wanted.

The Office for Budget Responsibility - the government's economic watchdog - will be given new powers to "whistle blow" when it believes that the "credibility rule" has been breached.

And under the Labour plans it will also report to Parliament rather than the Treasury.

"We know now from the world's central banks that the world economy is looking at stagnation, and there needs to be a new rule," Mr McDonnell told me.

"And we want people to have confidence in a Labour government. That means we are introducing a new fiscal credibility rule.

"First, that a Labour government will always balance day to day expenditure.

"Second, that we will only borrow for the long term, and that means for investment - investment in our infrastructure, in the homes that we need, the railways, the roads, the renewable energy.

"And in new technology to grow our economy.

"Third, debt will fall under a Labour government over a five year period.