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Cambridge Journal of Economics Advance Access published online on August 6, 2007
Cambridge Journal of Economics, doi:10.1093/cje/bem013
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© The Author 2007. Published by Oxford University Press on behalf of the Cambridge Political Economy Society. All rights reserved.

Fiscal policy under New Labour

Malcolm Sawyer*

* The University of Leeds

Address for correspondence: Economics Division, Leeds University Business School, The University of Leeds, Leeds LS2 9JT, UK; email: mcs{at}lubs.leeds.ac.uk

This paper seeks to provide an evaluation of fiscal policy under New Labour in the decade from its election in May 1997 to date. It begins with a brief review of macroeconomic performance over that period. It outlines the main features of the approach of the Labour government to fiscal policy including the ‘golden rule’ of public finance, and provides a critique of that rule and the general approach to fiscal policy. It considers how far the policy rules have been observed in practice. Finally, it argues that the relative macroeconomic stability since 1997 has not resulted from the fiscal policy pursued, but rather that changes in the fiscal stance have fortuitously offset variations in private expenditure.

Key Words: Labour government • Golden rule • Fiscal policy

JEL classifications: E61, E62

Manuscript received October 30, 2006; final version received February 9, 2007.


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