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Enigma of the 'fiscal mandate'

The Chancellor's so-called "fiscal mandate" is an enigma to most.

What is clear is that George Osborne wants to narrow the budget deficit - the vast gap between the amount of cash the Treasury rakes in from taxpayers and the amount it dishes out on public spending.

But the methods used to measure this gaping hole in the public finances - as well as the targets set by the coalition Government for filling it - can be mystifying.

To start with, the Chancellor will make frequent reference to something called the "cyclically adjusted current balance" or "structural deficit".

Even to the experts, the "structural deficit" is a rather elusive measure - but it is central to the task that Mr Osborne has set himself.

The UK has seen its gross domestic product (GDP) - a broad measure for the total economy - plunge since the financial crisis exploded. This hit tax revenues and pushed up welfare spending as people lost their jobs.

So in theory, part of the deficit - or some of it - should disappear when the mess is sorted out and we are back to the days before the gloom struck.

However, even when the economy is looking much rosier there is still likely to be a gap in the budget driven by excessive government waste.

That is the bit known as the structural deficit and the part that the Chancellor wants to remove.

But back in 2010, when the forecast was looking a little more optimistic, Mr Osborne set himself a second, supplementary goal.

This time he said he wanted to slash the UK's debt as a percentage of GDP by the financial year 2015/2016.

In the last set of official figures on the public finances, the UK's debt was a staggering 1.1 trillion. To put that figure into perspective, a trillion seconds is equal to 32,000 years.

It is also around 67.9% of the UK's GDP or economic worth.

This particular measure has been rising for some time and the Chancellor said he wants to see it come down by 2015/2016.

But this is the goal he is most expected to ditch or at least change in his Autumn Statement.

Because the independent tax and spending watchdog he set up - the Office for Budget Responsibility - is about to tell him that with the economy struggling as it is, he will have to borrow billions of pounds more than previously expected.

Bank of England Governor Sir Mervyn King effectively told the Chancellor it would be OK to ditch this debt rule if the global economy continues to grow - and it is at the moment.

It may also be seen as the lesser of two evils by the Chancellor, when faced with the alternative of hitting already struggling households and businesses with further spending cuts and tax hikes.

He is stuck between a rock and a hard place.

But abandoning or changing his debt rule also comes with risks.

The UK is one of 14 countries to have a highly coveted AAA credit rating from agency Standard & Poor's, while other agencies including Moody's and Fitch also have Britain placed on a AAA rating.

It is joined by the likes of Switzerland, Sweden and Hong Kong in effectively being able to borrow cash at attractive rates.

And Mr Osborne has put great emphasis on this fact, using the privileged status to provide cheap funding to the country's lenders through initiatives such as the Funding for Lending scheme (FLS).

But there are fears that missing the supplementary debt target could spark a credit rating downgrade.

Placing the UK on a "negative outlook", Fitch warned anything that threatened the "Government's ability to place the debt-to-GDP ratio on a downward path in 2015-2016" would be of concern.

Abandoning or changing the target could do just that.

This would cause great difficulties for the UK, as the cost of borrowing would increase.

This in turn is a clear sign that investors are losing faith in the UK economy - and the Chancellor.

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