Notes on 'a code for fiscal stability'

This note comments on two central issues for fiscal policy designin the UK, highlighted in the recent 'Code for Fiscal Stability'proposed by the new Labour government. The first concerns themerits of the so-called 'golden rule of public sector investment'- the proposition that, over the cycle, government borrowingshould not exceed government (net) capital formation. The secondconcerns the case for attempting to construct a more comprehensivebalance sheet of public sector assets and liabilities, includingtangible public sector assets and certain contingent claims.The two main conclusions are that the golden rule is withoutmerit but that, subject to some important caveats, the constructionof a more comprehensive government balance sheet is a worthwhileenterprise.