There is inevitably a focus on forecast revisions when any official body produces new predictions about the future. Today the Office for Budget Responsibility, Britain’s new fiscal watchdog, raised the 2010 growth forecast to 1.8 per cent and dropped the 2011 forecast from 2.3 per cent to 2.1 per cent, as the FT reported in recent days.
Robert Chote, the OBR’s new chair, also gave his endorsement to the deficit reduction plan, saying the government had a greater than 50:50 chance of wiping out the hole in the public finances within five years. All of this was incredibly easy to predict.
The interesting decisions taken by the OBR were on its estimate of the fiscal multiplier and its view of the degree of spare capacity in the economy. The first matters because it determines the official view of the effect of budget consolidation on growth. The latter matters because the degree of spare capacity determines the OBR’s view of the size of the hole in the public finances, but has the annoying problem of being impossible to measure. On these two issues, Mr Chote is gung-ho on the multipliers, but displays wise caution on sounding too certain about spare capacity. Read more
In his press conference this morning, Gordon Brown had a nice line about the Conservatives. He said: ”Novices cannot be trusted with the recovery”. His abuse of statistics throughout the press conference simply screamed: “The prime minister cannot be trusted”.
Here are two examples. Read more
In the British battle of the year so far, Balls vs. Balls, first blood has to go to Ed, the elder.
Ed Balls, children’s secretary and Gordon Brown’s Mini-Me, has been embarrassed in recent days by the public criticism of the government’s deficit reduction plans by Pimco, the global bond fund. The trouble is that Andrew Balls, Ed’s brother, is head of Pimco’s European investment team.
Yesterday, Scott Mather, head of PIMCO’s global portfolio management, said there was an 80 per cent chance of a credit rating downgrade for the UK if the government left its plan for the public finances unchanged as it did in the pre-Budget report. Read more
British politics is obsessed with a silly row over whether the Conservative policy of “recognising marriage in the tax system” is affordable. This is an idiotic question. Anything is affordable if you are willing to raise taxes elsewhere or borrow to fund it.
The only relevant issue is whether a transferable tax allowance (or other tax breaks for marriage) are a good idea. This important debate has been forgotten. Here are some reasons why transferable tax allowances are a terrible idea: Read more
More good news for China, Russia and India and more warnings for the US, UK and EU. George Soros asks if the new communist/capitalist divide has been replaced by a polarisation between international capitalism and state capitalism. Read more
Although tax receipts in the first half of the 2009-10 financial year are falling short, things should improve from here, writes Chris Giles of the Financial Times Read more
Alistair Darling, chancellor of the exchequer has just proposed new legislation “to require that the government reduces the budget deficit year on year”. Rarely has there been an idea either so pointless or so undesirable writes Chris Giles of the Financial Times Read more
The British public finaces are appalling says Chris Giles of the Financial Times and it is important not to become immune to just how bad they have become. But a simple chart shows the problem very starkly. Read more
Labour is positioning itself as the responsible cutter of public spending; the Conservatives say they are the only ones who will do it quickly. But all of their arguments are bogus, as the Institute for Fiscal Studies points out, writes Chris Giles of the Financial Times Read more