UK Election 2010

Chris Giles

This is probably wishful thinking, but I would like party leaders tonight to do the following:

Too much to ask? I will come back to this after the debate.

Chris Giles

David Hale, the US economist, told Australian TV last night that Mervyn King believes the coming fiscal austerity will keep the next government out of power for a generation.

“I saw the governor of the Bank of England last week when I was in London and he told me whoever wins this election will be out of power for a whole generation because of how tough the fiscal austerity will have to be.

And now we have the problem that it may not even be a majority government, it may have to be some kind of coalition government or some kind of informal coalition where one party agrees to support the other party, at least in producing a budget, and none of that will be good for financial confidence. I’d be very bearish right now on both the British pound and on the British Government bond market.”

Since Mr Hale thinks it is OK to speak freely about a private conversation, for the interests of clarity, I will do the same.

Mr Hale did not meet the governor of the Bank of England last week as he has claimed. In fact he met him in early March, long before the election campaign and long before the Budget on March 24. At a private breakfast meeting on March 12, Mr Hale reported a similar, but not identical, account of his conversation with the governor. I was present. His remarks about Mr King struck me at the time as exaggerated. Read more

Chris Giles

The UK election is dominated by the ramifications of no political party gaining a parliamentary majority and the cross-party co-operation that might follow. A different form of future co-operation was raised by Sir John Gieve, former deputy governor of the Bank of England, today – that between the Bank of England and the Treasury.

I am deeply indebted to my colleague James Mackintosh, the FT’s investment editor, who heard Sir John this morning. It certainly makes interesting reading and goes a lot further than Sir John went in his final speech as deputy governor last year. Read more

Chris Giles

I am at the Institute for Fiscal Studies launch of their election analysis. It is a pretty dismal affair; not because the work is bad, but because all three main parties’ plans are woeful compared with the necessary repair job for the public finances and the tax system.

The differences between the parties on the public finances is small, IFS says and, as the FT demonstrated yesterday, all parties’ “public spending plans are particularly vague”. The big row over the speed of fiscal tightening makes “a relatively modest difference to the long term outlook for government borrowing and debt”. Read more

UK politicians looking to slash public spending or increase taxes should reduce losses from fraud in the public sector instead, estimated at a whopping £38bn. So says a report by accounting firm MacIntyre Hudson LLP, in conjunction with the Centre for Counter Fraud Studies at Portsmouth University.

Fraud* – “where someone intentionally or recklessly obtains resources to which they are not entitled” – is grossly underestimated in the UK, argues the report. Of 132 investigations into fraud in the public sector in the past decade, the average loss rate was found to be 4.57 per cent of total spend. The UK Treasury, by contrast, reports just £4.2m fraud, or 0.026 per cent, though this is qualified with the admission that “the analysis does not necessarily offer a complete picture”. Read more

Chris Giles

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

Chris Giles

Ken Clarke, shadow business secretary, is an angry man and thinks British politics is being trivialised.

“We are in danger of treating this election as if it is just some TV celebrity talent contest. Read more

Chris Giles

Now that all the party manifestos are out, they make pretty rum reading. Those outside the UK might think that when you are running an 11 per cent-of-national-income budget deficit, this might dominate politics and the parties would be falling over themselves to tell the public how they planned to sort it out. Not a bit of it. Today’s FT shows the main parties are all at least £30bn short of describing the public spending cuts that will be needed in the first three years of government alone, just to meet the Treasury’s forecasts. And a longer piece goes into the detail of Britain, a country drenched by the deficit.

The trouble is, as an economist friend of mine told me yesterday, this is an equilibrium position. If one party conceals the truth from the electorate or thinks the others will, it makes sense for them all to follow. No one wants to be portrayed as offering misery and gloom if they win. Read more

Chris Giles

The Liberal Democrats usually get away with little scrutiny of their specific policies because the party will not form the next government, even if it might be highly influential in the event of a hung parliament.

Without going through the 109 pages in detail, there is good, bad and downright ugly aspects to the LibDem claims and plans. Read more

Chris Giles

Unnamed “experts” are wheeled out in the Conservative manifesto to bolster the Tories’ fight against the planned rise in national insurance contributions. The manifesto warns:

“This jobs tax, which will hit small businesses especially hard, will kill off the recovery. Experts predict it will cost 57,000 jobs in small and medium-sized businesses alone”.

But there is another expert the party has, for some reason, decided not to quote in its manifesto—Rupert Harrison, the Conservatives’ chief economic adviser. Yesterday, the party referred enquirers on national insurance to a peer-reviewed article he co-authored in the esteemed Economic Journal in 2007.

Perhaps the party did not expect journalists to bother to read or understand the equations. Read more