Abstract
The purpose of this contribution is to look into the fiscal and debt policies in the UK and also to discuss their future prospects. In doing so we begin with a discussion of the sustainability of deficits and debt, along with a precisely definition of sustainability. This is followed by a focused discussion of issues that relate to debt and growth, which in its turn requires a comprehensive analysis of the intertemporal budget constraint thesis. Two further relevant and important issues are subsequently addressed. These are, first, the relationship between the intertemporal budget constraint thesis and sustainability, and, secondly, 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.
This is a preview of subscription content, log in via an institution to check access.
Access this chapter
Tax calculation will be finalised at checkout
Purchases are for personal use only
Preview
Unable to display preview. Download preview PDF.
References
Arestis, P. (2012) ‘Fiscal Policy: A Strong Macroeconomic Role’, Review of Keynesian Economics, Inaugural Issue, 1(1), 93–108.
Arestis, P. and Sawyer, M. (2003a) ‘On the Effectiveness of Monetary and Fiscal Policy’, Review of Social Economics, 62(4), 441–63.
Arestis, P. and Sawyer, M. (2003b) ‘Reinstating Fiscal Policy’, Journal of Post Keynesian Economics, 26(1), 3–25.
Arestis, P. and Sawyer, M. (2004) Re-examining Monetary and Fiscal Policies in the Twenty First Century, Cheltenham: Edward Elgar.
Arestis, P. and Sawyer, M. (2005) ‘Aggregate Demand, Conflict and Capacity in the Inflationary Process’, Cambridge Journal of Economics, 29(6), 959–74.
Arestis, P. and Sawyer, M. (2006) ‘Fiscal Policy Matters’, Public Finance, 54(3–4), 133–53.
Arestis, P. and Sawyer, M (2012) ‘The “New Economics” and Policies for Financial Stability’, International Review of Applied Economics, 26(2), 147–60.
Azizi, K., Canry, N., Chatelain, B. and Tinel, B. (2012) ‘Are No-Ponzi Game and Transversality Conditions Relevant for Public Debt? A Keynesian Appraisal’, Working Paper Series, No. 296, Political Economy Research Institute, University of Massachusetts, Amherst.
Blanchard, O.J. and Fischer, S. (1989) Lectures on Macroeconomics, Cambridge, MA., USA: MIT Press.
Blanchard O.J. and Weil, P. (1992) ‘Dynamic Efficiency, the Riskless Rate, and Debt Ponzi Games under Uncertainty’, NBER Working Paper (later published in the Berkeley Electronic Journals in Macroeconomics, Advances in Macroeconomics, 2001).
Cecchetti, S., Mohanty, M. and Zampolli, F. (2011) ‘The Real Effects of Debt’, BIS Working Papers 352, Basel: Bank for International Settlements.
Cottarelli, C. (2011) ‘The Risk Octagon: A Comprehensive Framework for Assessing Sovereign Risks’. Available at http://www.imf.org/external/np/fad/news/2011/docs/Cottarelli1.pdf.
European Commission (2012) Treaty on Stability, Coordination and Governance. Available at http://european-council.europa.eu/media/639235/st00tscg26_en12.pdf.
Godley, W. and Rowthorn, B. (1994) ‘Appendix: The Dynamics of Public Sector Deficits and Debt’, in J. Mitchie and J. Grieve Smith (eds), Unemployment in Europe, London: Academic Press, pp. 196–206.
Hendon, T., Ash, M. and Pollin, R. (2013) ‘Does High Public Debt Consistently Stifle Economic Growth? A Critique of Reinhart and Rogoff’, Working Paper Series No. 322, Political Economy Research Institute (PERI), University of Massachusetts, Amherst, 15 April.
HM Treasury (2012) Budget 2012, HC1853, London: The Stationery Office,.
International Monetary Fund (IMF) (2010a) ‘Will it Hurt? Macroeconomic Effects of Fiscal Consolidation’, Economic Outlook, Chapter 3, Washington, DC: International Monetary Fund.
International Monetary Fund (IMF) (2010b) World Economic Outlook (WEO), Recovery, Risk, and Rebalancing, Washington DC: International Monetary Fund, October.
Kalecki, M. (1944) ‘Three Ways to Full Employment’, in The Economics of Full Employment, Oxford University Institute of Statistics, Oxford: Blackwell.
Lerner, A. (1943) ‘Functional Finance and the Federal Debt’, Social Research, 10(1), 38–51. Reprinted in W. Mueller (ed.) Readings in Macroeconomics, New York: Holt, Rinehart and Winston.
Office for National Statistics (2012) ‘Wider Measures of Public Sector Debt, December 2011’. Available at http://www.ons.gov.uk/ons/publications/rereference-tables.html?edition=tcm%3A77–242664.
Panizza, U. and Presbitero, A.F. (2012) ‘Public Debt and Economic Growth: Is There a Causal Effect?’, MoFiR Working Paper No. 65, April.
Reinhart, C.M. and Rogoff, K.S. (2010) ‘Growth in a Time of Debt’, American Economic Review, 100(2), 573–8.
Reinhart, C.M. and Rogoff, K. (2011) This Time Is Different: Eight Centuries of Financial Folly, Princeton, NJ: Princeton University Press.
Reinhart, C.M., Reinhart, V.R. and Rogoff, K.S. (2012) Public Debt Overhangs: Advanced-Economy Episodes Since 1800’, Journal of Economic Perspectives, 26(3), 69–86.
Ryoo, S. and Skott, P. (2011) ‘Public Debt and Full Employment in a Stock Flow Consistent Model of a Corporate Economy’, Working Paper 2011–26, Department of Economics: University of Massachusetts Amherst (forthcoming in Journal of Post Keynesian Economics).
Sawyer, M. (2000) ‘The NAIRU: a Critical Appraisal’, in P. Arestis and M. Sawyer (eds), Money, Finance and Capitalist Development, Aldershot: Edward Elgar, pp. 220–54.
Sawyer, M. (2009) ‘Private Finance Initiative and Public Private Partnerships: the Key Issues’ in P. Arestis and M. Sawyer (eds), Critical Essays on the Privatisation Experience, Basingstoke: Palgrave Macmillan, pp. 39–74.
Sawyer, M. (2011) ‘Progressive Approaches to Budget Deficits’, in O. Onaran, T. Niechoj, E. Stockhammer, A. Truger, and T. van Treeck (eds), Stabilising an Unequal Economy? Public Debt, Financial Regulation, and Income Distribution, Marburg: Metropolis Verlag, pp. 143–59.
Skott, P. and Ryoo, S. (2012) ‘Public Debt and Functional Finance in an OLG Model with Imperfect Competition’, Working Paper 2012–10, Department of Economics, University of Massachusetts Amherst.
Staiger, D., Stock, J.H. and Watson, M.W. (1997) ‘The NAIRU, Unemployment and Monetary Policy’, Journal of Economic Perspectives, 11(1), 37–49.
Woodford, M. (2003) Interest and Prices: Foundations of a Theory of Monetary Policy, Princeton, NJ: Princeton University Press.
Author information
Authors and Affiliations
Editor information
Editors and Affiliations
Copyright information
© 2014 Philip Arestis and Malcolm Sawyer
About this chapter
Cite this chapter
Arestis, P., Sawyer, M. (2014). On the Sustainability of Budget Deficits and Public Debts with Reference to the UK. In: Arestis, P., Sawyer, M. (eds) Fiscal and Debt Policies for the Future. International Papers in Political Economy Series. Palgrave Macmillan, London. https://doi.org/10.1057/9781137269539_2
Download citation
DOI: https://doi.org/10.1057/9781137269539_2
Publisher Name: Palgrave Macmillan, London
Print ISBN: 978-1-349-44399-4
Online ISBN: 978-1-137-26953-9
eBook Packages: Palgrave Economics & Finance CollectionEconomics and Finance (R0)