Abraham Lincoln famously said that “you can fool some of the people all of the time, and all of the people some of the time, but you cannot fool all of the people all of the time”. His successor, George W. Bush, is reported to have added: “You can fool some of the people all the time, and those are the ones you want to concentrate on.” Some British politicians wish to follow that advice in the debate on the public finances. Alistair Darling’s refusal to do that was, it appears, the reason Gordon Brown, the prime minister, wanted to drop him. But Mr Darling is to be praised, not dropped, for his probity.
As I have argued in two recent columns (“Tackling Britain’s fiscal debacle”, May 7, and “End Britain’s phoney fiscal war”, June 4), the fiscal position has become a huge medium-term challenge. It is also an obvious symptom of gross policy failure: structural public sector net borrowing is estimated by the Treasury at 9.8 per cent of gross domestic product this financial year.
This horrendous figure is the result of four mistakes: an overestimate of sustainable GDP; slippage in the fiscal position in the years up to the crisis; an exaggeration of sustainable revenue; and a surge in real spending, as a result of unexpectedly low inflation.
The remainder of the article can be read here. Debate from our panel of economists appears below.
