Daily Archives: November 19, 2012

©J. McHugh

The UK coalition government has reached almost exactly the halfway point in its electoral term. Quite soon, it will be too late for it to change its economic approach in time for the results to be seen before it goes to the polls on May 7 2015. Whether the prime minister recognises it or not, he is therefore facing a major strategic choice. Should the government change tack, while there is still time?

The strategy chosen by chancellor George Osborne in 2010 was based on a more rapid tightening in budgetary policy than was adopted in most other developed economies. The chancellor knew that the Bank of England would aggressively ease monetary policy in support of his plan, and hoped that this would result in a sharp depreciation of the real exchange rate, though he did not say this in public.

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