Money Blog: UK economy could 'collapse' if PM changes rules | Money News

(This is a summary of Conway's original analysis from earlier this month. Read the full story here.)

Consider the financial rules Rachel Reeves will face in her first budget. Most urgent is the Prime Minister's consideration of the so-called debt rule, which insists that the government must have a national debt equivalent to less than five years (technically “public sector net debt excluding Bank of England intervention”).

What is worth emphasizing at this point is that there is nothing fundamental about this rule. Reeves inherited it from the Conservatives, who dreamed it up years ago after Covid.

To meet this rule, the national debt must fall between years 4 and 5 of the OBR's five-year forecast. And that's according to the last OBR forecast, dating back to Jeremy Hunt's last budget. But not very much. There are only 8.9 billion people.

If those numbers ring a bell, it's because there are much-vaunted but little-understood “headroom” figures that many in Westminster love to babble about.

And – if you take this rule literally, which everyone in Westminster seems to be doing – you can see that the Prime Minister doesn't have much room left to spend in the upcoming Budget. She only has 8.9 billion to borrow!

The first thing to say is that there is no gospel in these rules. There is no slate that says we have to reduce the national debt in five years.

Second, sometimes investing in things can actually make you more money than it costs. However, the debt rule only considers five years into the future, so you cannot see the final breakeven point, only the costs.

Third, the debt rules used by the current government focus on measures of national debt that may not necessarily be correct in practice.

The measure we currently use excludes the Bank of England, which seemed reasonable a few years ago. The Bank of Korea has been implementing quantitative easing policies by buying and selling large amounts of government debt, which has distorted the national debt. It's probably best to leave it out.

Recent interventions by the Bank of England have actually served to increase the country's losses. I won't go into it in depth here at the risk of getting into trouble, but I think most economists are focused not on government decisions but on debt measures, which are currently largely influenced by central banks reversing monetary policy implementation. It seems pretty perverse.

That said, instead of focusing on the pre-BoE measure of net debt, there is a very strong argument that fiscal rules should focus on the overall measure of net debt. And importantly, if you look at the net debt measure, there is a greater reduction in debt between the fourth and fifth years. That is, there is much more headroom on other non-bank debt measures below 25 billion rather than below 9 billion.

Could Reeves declare that it makes much more sense to focus on the full PSND from now on, either in the budget or in preparation? It's quite plausible. And in some respects it's a fiddle, but in her defense it's a fiddle from a stupid rule to a slightly less stupid rule.

This also means she has more room to borrow to invest. If that's what she chooses to do. But this doesn't solve the deeper problem. In other words, both of these measures focus only on the short-term costs of debt without considering the long-term benefits of the investment.

If Reeves decides to stick with an arbitrary five-year deadline for debt reduction, but wants to incorporate a measure of investment benefits, she can always choose one of the two other measures for this rule.

She might focus on something called “public sector net financial liabilities” or “public sector net assets.” Both of these measures involve some assets and liabilities owned by the state. As a result, we hope to reflect a little more of the benefits of investing more money.

The problem with such measures is that they are subject to significant revisions, for example when accountants change their opinion about the value of a national road or rail network. Therefore, some argue that this measure is more volatile and easier to manipulate than simple net debt.

Nonetheless, these measures will dramatically change the “headroom” situation. Suddenly Reeves had over 60 billion headroom. Enough to spend money on huge investments without breaking her financial rules.

There is another change to the rules that makes more sense than the above. That is, changing the 5-year term to a 10-year or even 15-year term. On that horizon, every pound spent on an appropriate investment would suddenly appear to be a net positive rather than a loss to the economy.

What Are The Main Benefits Of Comparing Car Insurance Quotes Online

LOS ANGELES, CA / ACCESSWIRE / June 24, 2020, / Compare-autoinsurance.Org has launched a new blog post that presents the main benefits of comparing multiple car insurance quotes. For more info and free online quotes, please visit https://compare-autoinsurance.Org/the-advantages-of-comparing-prices-with-car-insurance-quotes-online/ The modern society has numerous technological advantages. One important advantage is the speed at which information is sent and received. With the help of the internet, the shopping habits of many persons have drastically changed. The car insurance industry hasn't remained untouched by these changes. On the internet, drivers can compare insurance prices and find out which sellers have the best offers. View photos The advantages of comparing online car insurance quotes are the following: Online quotes can be obtained from anywhere and at any time. Unlike physical insurance agencies, websites don't have a specific schedule and they are available at any time. Drivers that have busy working schedules, can compare quotes from anywhere and at any time, even at midnight. Multiple choices. Almost all insurance providers, no matter if they are well-known brands or just local insurers, have an online presence. Online quotes will allow policyholders the chance to discover multiple insurance companies and check their prices. Drivers are no longer required to get quotes from just a few known insurance companies. Also, local and regional insurers can provide lower insurance rates for the same services. Accurate insurance estimates. Online quotes can only be accurate if the customers provide accurate and real info about their car models and driving history. Lying about past driving incidents can make the price estimates to be lower, but when dealing with an insurance company lying to them is useless. Usually, insurance companies will do research about a potential customer before granting him coverage. Online quotes can be sorted easily. Although drivers are recommended to not choose a policy just based on its price, drivers can easily sort quotes by insurance price. Using brokerage websites will allow drivers to get quotes from multiple insurers, thus making the comparison faster and easier. For additional info, money-saving tips, and free car insurance quotes, visit https://compare-autoinsurance.Org/ Compare-autoinsurance.Org is an online provider of life, home, health, and auto insurance quotes. This website is unique because it does not simply stick to one kind of insurance provider, but brings the clients the best deals from many different online insurance carriers. In this way, clients have access to offers from multiple carriers all in one place: this website. On this site, customers have access to quotes for insurance plans from various agencies, such as local or nationwide agencies, brand names insurance companies, etc. "Online quotes can easily help drivers obtain better car insurance deals. All they have to do is to complete an online form with accurate and real info, then compare prices", said Russell Rabichev, Marketing Director of Internet Marketing Company. CONTACT: Company Name: Internet Marketing CompanyPerson for contact Name: Gurgu CPhone Number: (818) 359-3898Email: [email protected]: https://compare-autoinsurance.Org/ SOURCE: Compare-autoinsurance.Org View source version on accesswire.Com:https://www.Accesswire.Com/595055/What-Are-The-Main-Benefits-Of-Comparing-Car-Insurance-Quotes-Online View photos