Are you, or have you ever been, a deficit denier? The term is being bandied about with near-McCarthyite fervour, as debate hots up in anticipation of the Budget.
It’s not just the chancellor and his pugnacious opposite number who are trading insults on this topic. Politicians of all persuasions are now measured against their orthodoxy on deficit reduction. Dissenters deviate at their peril.
But there’s another form of denial that deserves closer scrutiny. Too much economic discussion is couched narrowly in terms of UK Plc. Despite the global origins of the financial crisis – and frequent-flyer trips by ministers to summits in Davos and beyond – there is a Little Englander flavour to the official response.
The latest issue of Public Finance aims to broaden policy-makers’ horizons. Ahead of CIPFA’s first international conference on March 15–17, it carries extensive coverage on the global economy (see David Walker's cover feature, New world disorder), and on wider international issues.
It’s a timely move. Recent GDP and inflation figures indicate that the recovery is far from on track. And future growth depends on the health of markets far beyond these shores. But on all these matters the coalition is, at best, conflicted.
When it suits – say, to justify doubling the rate of deficit reduction – ministers point to other countries’ sovereign debt problems, or the latest utterance from a ratings agency. More often though, the coalition acts as if this crisis were made, and can be cured, exclusively in Britain.
So, as the Institute for Fiscal Studies noted in its Green Budget, the government is pursuing a level of fiscal consolidation outstripped only by Greece, Ireland and Iceland. At Davos, the UK was out of kilter with many other industrialised nations, where fiscal stimulus is not yet a punishable crime.
Perhaps the Treasury should dust down an atlas, and remind itself that dynamic nations like China, India and Brazil will soon be responsible for two-thirds of global GDP, fuelled by levels of public debt that put Britain in the shade.
At the very least, the government could take its cue from the International Monetary Fund, which has belatedly owned up to under-regulating, under-performing and calling the global crisis wrong.
These and many related themes will be debated at the CIPFA conference. Let’s hope the chancellor – who likes to remind us about Brown and Balls’ ‘no boom or bust’ hubris – is paying attention.
Judy Hirst is the deputy editor of Public Finance
