It's a simple point, perhaps an obvious point, that only needs a short blog post, but I think it's worth making.
The Brits seem to be arguing about whether they should have some sort of rule (or charter) for fiscal policy, and if so, what it should look like. I am a bit skeptical, because once you get into the details (like Simon Wren-Lewis is doing here) it all starts to sound very complicated and likely to cause lots of arguments about what should be counted as what.
But set my skepticism aside.
And even if you are skeptical about the feasibility of a formal fiscal rule, it's a useful thought-experiment to help us be conceptually clear about what we want fiscal policy to look like. And one thing we want fiscal policy to look like is sustainable in the long run. And that is true regardless of whether we think fiscal policy is or is not needed to help monetary policy stabilise aggregate demand.
A sensible fiscal rule would not let the debt/GDP ratio wander off over time towards plus infinity or minus infinity. And since the debt (with the exception of some indexed bonds) is mostly nominal debt, we are talking about a ratio of debt to nominal GDP.
Suppose the Bank of Canada had a (say) 5% Nominal GDP level-path target. The "level-path" bit is important, because it means that if the Bank of Canada misses its target one year, it will make up for that miss in subsequent years to bring the level of NGDP back onto the same path as if it had not missed.
That would make it a lot easier to write down a sensible fiscal rule. For example, if the fiscal rule aimed at a long run target of 40% debt/NGDP ratio (just to keep the arithmetic simple), the rule would say the government is allowed to run a deficit of 2% of GDP on average. Because the debt and NGDP would then both be growing at the same 5% on average, so their ratio would stay the same. It's sustainable.
If you don't have an NGDP level-path target, nobody know what NGDP will be be over the coming decades. So nobody knows what average deficit would be sustainable. The fiscal rule would have to be changed whenever forecasts for long run NGDP growth are changed. And let's face it, economists aren't very good at forecasting the level of NGDP over the coming decades. But that won't stop us arguing about it, if it matters for fiscal policy.
(The Bank of Canada's 2% inflation target helps a bit, but not as much as an NGDP level-path target would help. Because: we can't forecast real GDP very well; the CPI inflation rate (which the Bank targets) is not the same as the GDP deflator inflation rate; the Bank of Canada does not fix its past misses with an inflation target, unlike a price level path target.)
Sure, an NGDP level-path target only fixes one problem with getting fiscal policy right. But every little bit helps.