Economist Jim O'Neill urged Britain's next leader to be bolder on investment borrowing, saying fiscal credibility cannot be judged by a single rulebook.
O'Neill, a former Treasury minister who has been advising the likely next prime minister, Andy Burnham, said policymakers should be "bolder" in considering investment-backed borrowing, even if that meant revisiting existing fiscal constraints.
Burnham, who is expected to replace Prime Minister Keir Starmer later this month, has promised radical change while sticking to Britain's existing fiscal rules. These include requiring the government to match day-to-day spending against revenue — a balanced current budget — a feat achieved only fleetingly in the last 25 years.
"A lot of fiscal rules get changed pretty easily. And that's because in reality ... the idea that there's one simple way of having fiscal credibility is kind of a bit daft," O'Neill told Reuters in an interview on Monday.
"I'm encouraging those with aspirations to be bolder — because I don't think these things should be seen as negative," he said, adding he could not talk about specifics as he had been involved in some "very recent discussions".
O'Neill acknowledged that breaking existing fiscal rules could upset financial markets. But dealing with some of Britain's deep-seated problems credibly would result in a significant positive response from markets, he added.
Asked whether Starmer's 2024 manifesto had reinforced concerns about fiscal rules, O'Neill said election manifestos were ultimately "sales documents" that can end up constraining governments once they take office.
"In that case, as it did with previous governments, it just locks them into not being able to do sensible things, all the things that need to probably change," he said.
Since the 1990s, UK governments have set fiscal constraints on borrowing to fund spending deficits and on public debt relative to GDP.
O'Neill said he believed the recently created National Infrastructure and Service Transformation Authority should become a publicly transparent body, assessing the impact of infrastructure projects. That data could then feed into calculations of the Office for Budget Responsibility, the UK's independent fiscal watchdog.
"The OBR would then simply use that to influence their own scoring on long-term forecasts - and I would hope that a Burnham government is going to pursue something like that."
Asked whether he might take a position in a future Burnham government, O'Neill said he had not had any formal offers.
