Sitting in the Treasury Select Committee listening to Alistair Darling, chancellor, give evidence on Britain’s fiscal position, I am struck by a contradiction and one hopeful sign in Britain’s fiscal consolidation plans.
The current contradiction is that the chancellor insists he knows the total public spending figures because he knows borrowing will be halved, but he cannot reveal anything else because it is too uncertain. If uncertainty rules and the details of spending projections are completely uncertain, there can be no credibility in the government’s commitment to protect spending on schools, hospitals and police. He can’t be sure he has the cash. Read more
Two days on and the UK’s pre-Budget report is still generating huge amount of political heat with little light and none of the arguments has anything to do with the windfall tax on bonuses.
Depending on who you read, the PBR was either an eye-wateringly tight budget with swingeing tax rises and spending cuts, a fiscal loosening or a neutral statement. All three can be true depending on what form of legitimate comparison you choose to make. I’ll tell you what I think in a second, but the upshot is whatever assumptions you make, the numbers are small and so have minimal effect on the economy, the likely recovery or the exit from extraordinarily loose monetary, fiscal and financial policies. Read more
Alistair Darling’s task in the pre-Budget report was to improve the credibility of Britain’s deficit reduction plans for the public, the markets and for those running monetary policy. I am convinced this report will fail on all counts.
With a couple of hours digging through the numbers, the report strikes me as deeply political and its presentation extremely unhelpful. This is not the way to gain credibility. Why? Read more
The Bank of England governor said last month that Britain lacked “a credible plan” for cutting its £175bn deficit. But if he was hoping that Alistair Darling would announce a big new fiscal squeeze next week, he will be disappointed.
The chancellor has discarded the criticisms of Mervyn King, the Conservatives and the credit ratings agencies that he is not moving quickly enough to cut borrowing; his pre-Budget report will argue that the priority now is getting the economy moving. It may not be enough to satisfy the markets. Read more at ft.com. Read more
Alistair Darling seems not to think much of Mervyn King’s call to split banks into their utility functions and speculative bits, writes Chris Giles of the Financial Times Read more