Britain’s fiscal rules should be ripped up by Liz Truss if she wins the Conservative leadership race, one of her key allies has said.
Sir John Redwood, who served as the head of Margaret Thatcher’s Downing Street policy unit and is tipped to return to government if Ms Truss wins, said she should abandon the practice of targeting a set percentage of GDP for national debt and the deficit.
He also called for a review of both the Bank of England and Office for Budget Responsibility (OBR), and suggested the Foreign Secretary should be inspired by Mrs Thatcher in removing utilities and transport from state control.
Since 1997, fiscal rules have been announced by chancellors during Budget statements in an attempt to control government spending.
They usually set a restriction on the proportion of national debt or deficit as a percentage of economic output.
But in an interview with The Telegraph, Sir John said the practice is a hangover from EU fiscal regulation agreed between member states at the Maastricht conference in 1992, and does not encourage economic growth or limit inflation.
“I think having a fiscal rule, which is a variant of state debt as a percentage of GDP, and the public deficit as a percentage of GDP in any given year, is not really the right couple of rules for the two targets you’re trying to meet,” he said.
The Tory backbencher said ministers should maintain “sensible controls over growth in public spending and in public debt” by instead monitoring the amount of money paid by the Treasury to lenders in interest payments.
In a coded rebuke to Rishi Sunak, who was the chancellor until last month, he added: “You have to elect governments that take controlling public finances seriously, and they then have to take them seriously.
“If you have a government that doesn’t take controlling public finances seriously, it won’t matter what your fiscal rules say, as we know from recent past experience,” he said.
‘I’d be happy to take a job’
Sir John is expected to be appointed as a Treasury minister in Ms Truss’s government and is understood to have helped shape her thinking on economic issues during the campaign.
He has spent the majority of his parliamentary career on the backbenches, where he has argued for a smaller state and against Britain’s membership of the EU, after dramatically resigning from Sir John Major’s Cabinet after the then-prime minister told his critics to “put up or shut up”.
Sir John said he had not had “any discussions” with Ms Truss about taking a role if she wins the contest, but told The Telegraph he would accept a job if he was offered one.
“I’ve always said I’d be happy to take a job which I thought I could do and which the leader thought was valuable for the conduct of government,” he said.
