Gordon Brown changes length of economic cycle

| July 19, 2005 | 0 Comments
Gordon Brown changes length of economic cycle

In the UK on Tuesday, UK chancellor Gordon Brown told the Treasury select committee that the current economic cycle began in 1997, not in 1999 as the Treasury had previously assumed.

By changing the length of the cycle, Mr. Brown makes it more likely that his goal on balancing the budget will be met.

Mr. Brown’s so-called “golden rule” call for the budget to be balanced over the course of the economic cycle as a whole. By lengthening the cycle, which is to end this year, the huge surpluses of 1997 through 1999 can be used to help counterbalance the current economic slowdown which has resulted in lower tax revenues.

By changing the length of the economic cycle, however, Mr. Brown has come under criticism from Liberal Democrats, who accuse the chancellor of changing the rules so that he can claim to have met his goals.

The Liberal Democrats’ call for an independent assessment of the budget was backed by a think tank, the National Institute of Economic and Social Research.

The Treasury defended Mr. Brown’s revision of the cycle’s length, saying that the earlier estimate had been provisional and that the new revision is based on data from the Office of National Statistics.

Mr. Brown himself told members of parliament that the rule would have been met even had the length of the economic cycle not been revised longer.

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