Prudence officially busted.
A while ago on this blog, I predicted some smoke-and-mirrors to cover the worst effects of the Northern Rock fiasco. I still predict we’ll see some serious spin in terms of inflation rates, and I can’t help thinking the disgraceful treatment of police pay, and perhaps other spending issues in the public sector, owes something to a vain attempt at damage-limitation.
But one element of that appears already to be unravelling. Since the government has now taken Northern Rock’s liabilities on itself, the Office of National Statistics is apparently insisting that it be included on the government’s balance sheet. This is probably a Good Thing: trying to pretend it’s not there stinks of Enronism.
A corollary of this is that Brown’s economic “prudence” is now officially well-and-truly busted. This shoots public-sector debt way above Brown’s limit of 40% of GDP.