by Sunny Hundal
8:55 am - January 8th 2013
8:55 am - January 8th 2013
This was Portes’ reply:
What is Plan A? Eliminating the structural budget deficit by the end of the Parliament? That was abandoned in 2011. Reducing the debt-GDP ratio in 2015-16? That went in the Autumn Statement. Setting DEL spending targets but allowing the “automatic stabilisers” which the Chancellor once described as a “key part of the flexibility built in to our plan” to function? The Autumn Statement dropped them too. So there is no “Plan A” anymore; the UK no longer has a credible medium-term fiscal framework, and it would be sensible for the government to consult on a more credible replacement.
What should the stance of macroeconomic policy be in the short term? A year ago the Chancellor claimed that those who argued that premature fiscal consolidation would not boost confidence but the opposite, would not stimulate private demand and investment but reduce it, and that increased government borrowing would have little or no impact on long-term interest rates were “on the outer fringes of the international debate.” This has been NIESR’s consistent position for the last three years – along, of course, with Martin Wolf in these pages. Our analysis has proved accurate. It remains the case that in the short term fiscal policy is too tight, and a temporary loosening would improve prospects for output and employment with little or no negative effect on fiscal credibility.The second paragraph outlines the position of the left too. But it’s the first paragraph that catches the eye.
Jonathan Portes is right: Plan A is already dead.
It keeps getting delayed to the point that its timeline is now longer than Labour’s original plans for paying off the debt. The very same plans they said would cause turmoil in the markets.
I suspect the main reason the political press carries on pretending that Plan A exists is that they don’t really know what’s in it
Liberal Conspiracy
