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Old Teaser

Written by Dr Eamonn Butler

18 May 2010

New Zealand’s Labour government in the 1980s turned around a country gummed up by regulation and fat government. They introduced inflation targeting to make their money sound again and set entrepreneurs free by pruning regulation department by department, quango by quango.

An offbeat but important part of New Zealand’s revolution was to make its government follow the same international accounting rules it imposes on everyone else. In other words, when politicians make promises – higher pensions, bigger benefits, more new schools and hospitals – they have to identify and provide for their future cost. No living high on the hog today and leaving our children with the debts to pay.

he East European republic of Georgia turned itself round by imposing strict rules on government spending. President Mikheil Saakashvilli wants a constitutional amendment to cap government spending at 30 per cent of GDP, the budget deficit at 3 per cent, and the national debt at 60 per cent of GDP so future Georgian governments won’t be able to get into the same pickle that Gordon Brown has got us into.

We also need a version of America’s 1989 President’s Council on Competitiveness, which subjected every new legislative and regulatory proposal to analysis by economists and accountants, to challenge the spin and calculate their real economic burden on trade, competitiveness, and jobs. (Not surprisingly, few ideas from Congress survived.)

America can also teach us about sunset rules on quangos – if their lives are not consciously renewed each five years, they expire. And budget ballots, too – many US localities require a public referendum to approve the state budget. No agreement by the people, and the politicians can’t do anything at all.

Published in the Telegraph here.