A hung parliament will produce governmental paralysis and economic mayhem. Well maybe. But may be not.
The Institute for Government, which like the Institute for Fiscal Studies tries to offer up a few facts to inform the fevered pre-election debate, has a neat briefing on hung parliaments on its website.
One particular piece of Powerpoint is well worth the look for those who fear that a hung parliament will see the UK knocking on the door of the IMF within days.
It plots governments, whether they be coalitions, majority or minority controlled, against the size of their structural deficit.
Guess what? Governments with clear single party majorities tend to have the worst structural balances – headed by Greece, Japan, the UK and the good old US of A. Countries with coalition or minority governments – the Scandinavians, the Belgians and the Dutch, for example, tend to have much better ones.
Nothing, of course, is black and white. There is a fair amount of scatter in the scatter diagram. Majoritarian France has a relatively low structural deficit, minority Portugal a high one.
The diagram also shows where countries are now. It doesn’t follow that a minority or coalition government would necessarily be better at dealing with a structural deficit. Separate evidence does show that some of the most successful fiscal corrections have in fact been carried out under coalition or minority rule, even if on other occasions small parties holding the balance of power have hampered that.
The truth is probably that the impact of a hung Parliament on the deficit will depend chiefly on how those involved behave. Which will be a test in the UK given that it has little recent experience of what the Lib Dems like to call balanced Parliaments.
What the slide does undoubtedly show, however, is that strong (majority) government equals sound government finances is a far from automatic equation.
Jim Pickard
Kiran Stacey
