BRITISH PRIME minister Gordon Brown and Conservative party leader David Cameron were joined in a bitter war of words yesterday over the "relaxation" or "collapse" of the Labour government's "golden rules" for borrowing and spending.
In a major speech last night, chancellor Alistair Darling signalled the new approach to fiscal policy, insisting his "core objective right now" must be to steer the economy through difficult times, while assuring government would not borrow irresponsibly in face of the global downturn.
"Just as markets change, so should policy," Mr Darling said. "Today, governments all over the world are using approaches that had until recently been consigned to policymaking history, but it is natural that the conduct of policy should evolve." He echoed Mr Brown's insistence that Labour's previous success in reducing national debt enabled the government to borrow prudently now and said to apply the golden rules rigidly now would be "perverse".
Mr Cameron had earlier pronounced the government's rules on borrowing and debt levels dead, while shadow chancellor George Osborne said the scrapping of the rules would destroy "the final remaining pillar" of Mr Brown's remaining economic legacy. The rules, introduced by Mr Brown as chancellor in 1997, say the government should only borrow to invest over an economic cycle, and not to fund current spending and public sector debt which should remain below 40 per cent of national income.
During angry clashes in the Commons, Mr Brown side-stepped Mr Cameron's invitation to repeat his (Mr Brown's) previously stated view that "you cannot buy your way out of a recession".
Warning against "a spending splurge", the Tory leader suggested Mr Brown had been "caught red-handed" making "irresponsible claims about government plans to spend its way out of current problems". Mr Osborne had earlier called for a drastic cut in interest rates, while raising the spectre of a 10-year deflationary slump if the government heavily increased borrowing and saddled the country with a large debt.
"The policies that got us into this mess cannot be the ones to get us out of it," he said. But just as the government had acted to stabilise the banking system, Mr Darling said the same determination was needed "to ensure that fiscal policy supports monetary policy, here and across the world, in these exceptional circumstances".
Mr Darling's renewed call for international action coincides with Mr Brown's appeal for hundreds of millions of dollars in additional support for the International Monetary Fund to assist "stricken states". Mr Brown will raise the issue with oil-rich states during a tour of the Gulf starting Saturday.
