Chris Giles is the FT’s economic correspondent and in a tweet he has said “I’ve suggested a looser fiscal framework than John McDonnell and Sajid Javid.”
Perhaps he’s just listened to Alexei Sale on Radio 4 “Austerity is the idea that the global financial crash of 2008 was caused by there being too many libraries in Wolverhampton.”
Currently, the [fiscal debt] rule sets a target for public sector net debt as a percentage of gross domestic product to be falling in 2020-21. This debt rule has outlived its usefulness and needs to go.
He hasn’t really changed his outlook that much as we see when he says:
The fact that the debt rule is now the primary constraint on both the Conservative and Labour parties seeking to buy votes with grand spending pledges suggests it is serving its purpose in helping to guard against unsustainable electoral politics.
It would be an interesting debate to consider what exactly unsustainable electoral politics were. To me he has just called democracy unsustainable. But as he is the FT’s economics correspondent perhaps we should have low expectations. Which makes this following paragraph all the more surprising and important:
The debt rules were always far from optimal. Economic theory tells us very little about the right level of public debt. Limiting its rise has also forced politicians into bending the rules, for example by “paying” for public investment by attracting private finance at unnecessary cost. Most important, the focus on one side of the public sector balance sheet encouraged the deterioration of the fabric of the country. It is not an exaggeration to say that the debt rule explains deficient UK infrastructure spending and inadequate social housing in high demand areas. It will hinder the government’s ability to help the adoption of low carbon technology.
He hasn’t really got it because he still goes on to call for the balancing of the government’s current budget, but he does suggest that the government should consider public assets as well as liabilities (and all those unnecessary Private Finance Initiative contracts are most definitely public liabilities in every sense). He continues by suggesting that the government should “commit to publishing their objectives for capital spending — including, for example, affordability targets for young people’s housing costs, targets for carbon emissions and productivity growth targets resulting from better infrastructure. The Office of Budget Responsibility would then assess the success of government in meeting these objectives alongside the sustainability of the public finances.”
This seems to me rather a good idea as it doesn’t target money so much as the objectives of spending it and that can surely represent only an improvement on our current obsessive and prolonged austerity.
This is a welcome chink in the monetary armour of a conventional economist – and one at the FT at that.
We probably need a few more jokes from Alexei Sale to prize that chink open a little wider…