A sharper-eyed correspondent has pointed out to me that Nick Clegg slightly caveated the Golden Rule by saying he would run a surplus “excluding capital spending that enhances economic growth or financial stability”.
I will await his no doubt excellent analysis to work out what this means. Clearly, it will mean running a tighter spending envelope than calculated before (although there are a heap of other caveats before we know what that envelope will be: benefits cuts, tax rises, etc). If about half of net capital is judged not to be “growth enhancing”, that means £15bn less for RDEL – which on my calculations is a very serious matter. I am not entirely sure how I would hit the original figures, certainly not £15bn less.
However, a more general point: I am a bit worried about how you define “capital spending that enhances economic growth”. I think the intention may be to remove some of the historical splurges Brown is accused of – schools, hospitals, opera halls while continuing to count roads, science parks, etc. But analysis is never that neat. You need marginal analysis; a country stuffed full of airports or roads isn’t enhancing growth by building more, and one without adequate hospitals may well improve the nation’s growth capacity by building some.
And whenever you introduce a new rule, you introduce the potential for gaming and distortion. I referred to this in my FT article, the “fiendish schemes”, a whole industry of officials trying to outwit each other. Introducing another category within the capital category will produce a right festival of rule-bending fun. Sometimes, I think it is easier just to say money is money. All in all, I am not sure this is an enhancement to the rule.