...into the darkness
As you may know, following a Freedom of Information request, HM Treasury has released an internal paper analysing international experience with so-called fiscal consolidations - ie how to tackle humongous fiscal deficits. Predictably, all the really interesting bits - including HMT's Next steps - have been blacked out (pic). This may be a crisis of historic proportions but we mere taxpayers are not to be trusted with HMT's real views on the choices before us.
Still, there are some useful snippets:
- Spending cuts are preferred to tax rises - "there is broad agreement in the literature that spending restraint is more likely to generate lasting fiscal consolidation and better economic performance than tax increases"
- Cuts should focus most heavily on public employment and welfare payments, which have featured in all major consolidations (eg see this blog).
Here's HMT's summary cuts menu, based on what's worked internationally (click on image to enlarge):
Unfortunately, it's one thing to analyse international experience and understand what you have to cut, and quite another to take the all-important next step of actually wielding the scissors.
And on that score, events are taking a very depressing turn. Dave and George are now so rattled by their falling poll lead and Mandy's superbly brass-necked attack on their economic competence, that they're wobbling around all over the road. Apparently, they're even recruiting the utterly discredited Lord Stern to advise on "green growth" - aka taxing and regulating our economy back to the Stone Age.
A hung parliament doesn't bear thinking about. But even if - as still seems likely to Tyler - the Tories win, fiscal policywise it sounds very much like we're just going to have more of the same. Which, as we all know, means drifting along until we hit the rocks of a market panic. By which stage, inflation will be well out of the traps, the management of our most dynamic companies will have relocated overseas, and we'll have to endure a decade of cuts with no prospect of stimulating private sector growth on the other side.
And the next steps? After one stuttering term of