Mr. Sebastian Barnes:

I agree that public spending choices should not be distorted by the fiscal rules. There may be a case for private delivery but that case should rest on its own merits. If it does not exist, it is hard to see why the Government should do it in a more inefficient way. The point is more that at the higher level, governments need to make choices. It is very difficult for them to make choices because there is very pressing social need. There are strong demands from the public for different things and there is a certain reluctance in raising taxation as well, from a political point of view, which we see in many places. It is these hard choices that need to be made. When governments try to avoid them, they may put fiscal sustainability at risk.

Stepping back from it, if we look at many advanced economies over the past 30 years, debt has just been on an upward trajectory. When there is a crisis, debt goes up, and then during the good times instead of bringing debt back down so we can cope with the next one, we level it off and then another crisis hits and it goes up. That never happened because anyone thought it was a good idea. It happened because governments were unable to control public finances. That is kind of why we need this sort of framework to discipline those controls. Otherwise all we are doing is eroding fiscal sustainability. We are increasing risk and at some point that will correct in a way that we know can be very painful. It is important for governments to keep their balance sheets in good condition, precisely to allow them to do all the social action they need to do.