On the Sustainability of Budget Deficits and Public Debts with Reference to the UK

Abstract

Universities of Leeds, Sheffield and York http://eprints.whiterose.ac.uk/ This is an author produced version of a book chapter published in Fiscal and debt policies for the future. Abstract The purpose of this contribution is to look into the fiscal and debt policies in the UK and also discuss the future prospects of them. In doing so we begin with a discussion of the sustainability of deficits and debt, along with what precisely sustainability is, followed by a focused discussion of issues that relate to debt and growth, which in its turn requires a comprehensive analysis of the inter-temporal budget constraint thesis. Two further, relevant and important issues are subsequently addressed. These are, first, the relationship between the inter-temporal budget constraint thesis and sustainability, and, second, its consistency with household behaviour. The sustainability of deficits and 'functional finance', structural budgets and the impossibility of balanced structural budget are then discussed. Finally, the future of UK fiscal policy is addressed before we summarise and conclude.