The Golden Rule is a guideline for the operation of fiscal policy. The Golden Rule states that over the economic cycle, the Government will borrow only to invest and not to fund current spending (Wikipedia).
The core of the ‘golden rule’ framework is that, as a general rule, policy should be designed to maintain a stable allocation of public sector resources over the course of the business cycle.
In the UK, the Golden Rule was officially adopted by Gordon Brown in 1997.
In the UK on Tuesday, UK chancellor Gordon Brown told the Treasury select committee that the current economic cycle began in 1997, not in 1999 as the Treasury had previously assumed.
By changing the length of the cycle, Mr. Brown makes it more likely that his goal on balancing the budget will be met.
Finance Markets
In 2005, for example, it looked like the government would miss the target. By coincidence, at that time, it added two extra years on at the start of the cycle, moving the beginning from 1999 to 1997. The government happened to run a surplus in those two years. So hey presto, the books were balanced again.
Brown may be meeting his own increasingly vague fiscal rules. But that doesn’t tell you much about rising debt - which is arguably much more significant.
Channel Four’s FactCheck
He’s gone back to 1997, he’s taken two years of fiscal surplus which are my surplus, achieved by sticking to my figures, in order to say he’s still abiding by the blessed golden rule which was a useless rule in any event.
Ken Clark, former Chancellor, speaking to the BBC
It was also always understood that that cycle (whenever it began) would end in 2009, but it became apparent in 2008 that while the change in start date meant that the “golden rule” was being met at that time it would still be breached by the end of the cycle in 2009. So, Brown simply changed the dates again, saying that the cycle had ended in 2006 and that we were now in a new one.