A rule you can rewrite is not a rule

The Government is preparing to loosen the rules that limit its own borrowing, and the rules will let it, because the Government writes the rules. Chancellor after chancellor has arrived with a borrowing rule and left with a different one. The rule always loses. That is not a run of bad luck. It is what these rules are.

For most of modern history the pound needed no such promises, because it was tied to gold. A government could not simply will more money into being; the metal did not care what ministers wanted. That discipline was brutal, and in the end Britain chose not to bear it: the pound left the gold standard in 1931, and from that day the currency rested on nothing harder than belief - belief that the state would not abuse the printing press or the debt markets.

Belief needs something to hold on to. So governments began writing rules for themselves. The most famous arrived in 1997, when a new Chancellor announced a "golden rule" for borrowing - the name itself a small confession of what was being imitated. Borrow only to invest. Keep debt prudent. It sounded like an anchor. But it differed from actual gold in one respect, and it turned out to be the only respect that mattered: it was a promise with no penalty. Nothing happened if you broke it, except that you had broken it.

Then the financial crisis arrived and the golden rule went the way of the gold. Rule after rule has followed - new targets, new dates, new definitions of debt - each announced as proof of discipline, each adjusted when it began to pinch. A rule its own author can rewrite binds only while it is convenient, and a constraint that binds only while convenient is not a constraint. It is a performance. The audience is the bond market, which lends Britain the difference between what it raises and what it spends.

They say flexibility is the point - that a government chained to a rigid rule in a slump would make the slump worse - and there is truth in that. But flexibility for the borrower is doubt for the lender, and doubt has a price. The mini-budget of September 2022 showed what happens when the price is called in. A government announced borrowing the market did not believe, and borrowing costs on five-year government debt rose by the most ever recorded in a single day. No rule was broken. No committee voted. The lenders simply repriced their belief, within hours.

So the discovery of the last century is an uncomfortable one: the rules that replaced gold were never the anchor. The market's belief is the anchor, and the written rules are letters to it, redrafted whenever keeping the promise gets hard. This week it was reported that the Government intends to stretch its rules again, to borrow billions more a year for investment. Perhaps there are worse things to borrow for. But nobody should call what remains a rule. A rule you can rewrite when it binds is a request for patience, addressed to people who are under no obligation to grant it.

Gold never had to be believed. Everything since has.

An opinion of the house.