Compelling case for earlier cuts
GEORGE Bernard Shaw is credited with the observation that: “If all economists were laid end to end they would not reach a conclusion.” Another widely quoted assessment of the profession, the original source of which is more obscure, is that if one were to ask a question of five different economists one would receive six different answers.
GEORGE Bernard Shaw is credited with the observation that: “If all economists were laid end to end they would not reach a conclusion.”
Another widely quoted assessment of the profession, the original source of which is more obscure, is that if one were to ask a question of five different economists one would receive six different answers. It is hardly any surprise, therefore, that the letter from 20 leading economists calling for more urgent action to tackle the UK's spiralling national debt, which appeared in The Sunday Times the weekend before last, was followed by not one but two responses in the Financial Times last Friday, from other groups of economists, totalling around 60 in all, setting out the case for delaying spending cuts until next year.
Despite the Government's satisfaction at this apparent three-to-one vote of confidence in its approach, it does not do to take too much notice of these numbers for those who wrote to The Sunday Times have cold logic on their side.
The letter to the FT organised by cross-bench peer Lord Skidelsky and carrying around 40 other signatures including that of former Monetary Policy Committee “dove” David Blanchflower, concluded with the observation that “the first priority must be to restore robust economic growth”.
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This rather begs the question. As those who wrote to The Sunday Times, including ex-MPC “hawk” Tim Besley, correctly observed, a sustainable recovery delivering the growth necessary for the restoration of the public finances itself requires a credible fiscal plan to maintain confidence in the UK's economic policy framework.
Without this confidence, the UK could face higher long-term interest rates, so blighting the recovery for years to come. Pursuing growth at all costs with the public finances already in such a parlous state is putting the cart before the horse.
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n Shadow Chancellor George Osborne did nothing to help the case for reducing the national debt as quickly as possible with his suggestion at the weekend that a Conservative government might offer private investors discounted shares in the part-nationalised Royal Bank of Scotland and Lloyds Banking Group.
With the Thatcher era to live up to, one can understand Mr Osborne feeling a certain sense of glee at the prospect of having something to privatise.
However, the best way to reward taxpayers for the support they have given the bailed-out banks is to realise every last penny when the time comes for the Government to sell its stake, and to use the proceeds to pay-off debt.
Selling shares on the cheap not only leaves the Tories wide open to allegations of “buying votes” but, far worse, undermines the case for restoring the public finances as a matter of urgency.