Golden showers
So we all know, one way or the other, that the economy's a bit screwed. Latest up with the bad news is Ernst and Young's Item Club, who reckon UK growth has slowed substantially over this year, to about 1.6% - rather than the 3-3.5% Gordon Brown was predicting, pre-election.
More interesting than their figures, though, are the conclusions being offered. Less growth in general means less money going into the public coffers, and so...
This sounds innocuous. Via the ONS and the National Audit Office, the Treasury fiddled the figures for growth in previous years so as to appear Brown was not breaking his own rules on spending. The "Golden Rule" is a glittering irrelevance. Asking for "reforms" to "flimsy" fiscal rules may then seem a reasonable way to prevent such chicanery. It's something the Lib Dems, in the person of latter-day Thatcherite, Vince Cable, have been pushing for some time:
(Cable offers some more details here.) The CBI are equally keen, which ought to raise further suspicions:
In just the same way the government no longer has direct control over the interest rate, New Labour delegating the management of this key policy instrument to the Bank of England shortly after arriving in office, the Lib Dems (backed by the CBI) would apparently like to perform a similar feat with how much the government can spend on schools and hospitals and whatnot.
The aim is to preserve "credibility" with the financial markets. Never mind that decisions about public spending are intensely political, with elections won and lost on precisely this issue. The Lib Dems - and an emerging consensus in the financial world itself - want to remove the messy business of democracy from such questions and replace it with the clean and allegedly neutral decisions of "fully independent" so-called experts. If market "credibility" is the goal, these advisors will be anything but neutral: they will favour whatever the financial markets favour. They won't challenge or confront those markets.
This is the essence of neoliberal economic management: squeeze out the patches of popular control and sovereignty in the economy, however feeble they may be, and introduce supposedly value-neutral management techniques. When New Labour stuffs City consultants' mouths with gold, or throws public money into the bottomless pit of PFI, it is performing a similar trick. The idea that the entirety of government spending should be subject to the approval of unelected "advisors", simply to appease the markets, is an enormous extension of the same principle.
More interesting than their figures, though, are the conclusions being offered. Less growth in general means less money going into the public coffers, and so...
[The report] said that this year's public borrowing figures were unlikely to be much better than last year's deficit with the chancellor thought to be facing an £11bn black hole in his accounts.
Prof Spencer also criticised Mr Brown for revising the dates of the economic cycle in order to make sure that he met his "golden rule" - that borrowing should not exceed current spending over the whole cycle.
"These developments show just how flimsy the current budgetary framework is. Reform of the fiscal rules is long overdue," he said.
This sounds innocuous. Via the ONS and the National Audit Office, the Treasury fiddled the figures for growth in previous years so as to appear Brown was not breaking his own rules on spending. The "Golden Rule" is a glittering irrelevance. Asking for "reforms" to "flimsy" fiscal rules may then seem a reasonable way to prevent such chicanery. It's something the Lib Dems, in the person of latter-day Thatcherite, Vince Cable, have been pushing for some time:
We always argued however that [government] spending should be disciplined within honest, transparent, fiscal rules... That is why the Liberal Democrats have argued that the process of assessing fiscal performance, including the operations of the Office of National Statistics, should be fully independent of government.
(Cable offers some more details here.) The CBI are equally keen, which ought to raise further suspicions:
The CBI's chief economist, Ian McCafferty, said: "The announcement only serves to highlight the sharp contrast between monetary policy, which is well-understood and appears genuinely free of political involvement, and fiscal policy, where the Treasury is able to act as both judge and jury."
In just the same way the government no longer has direct control over the interest rate, New Labour delegating the management of this key policy instrument to the Bank of England shortly after arriving in office, the Lib Dems (backed by the CBI) would apparently like to perform a similar feat with how much the government can spend on schools and hospitals and whatnot.
The aim is to preserve "credibility" with the financial markets. Never mind that decisions about public spending are intensely political, with elections won and lost on precisely this issue. The Lib Dems - and an emerging consensus in the financial world itself - want to remove the messy business of democracy from such questions and replace it with the clean and allegedly neutral decisions of "fully independent" so-called experts. If market "credibility" is the goal, these advisors will be anything but neutral: they will favour whatever the financial markets favour. They won't challenge or confront those markets.
This is the essence of neoliberal economic management: squeeze out the patches of popular control and sovereignty in the economy, however feeble they may be, and introduce supposedly value-neutral management techniques. When New Labour stuffs City consultants' mouths with gold, or throws public money into the bottomless pit of PFI, it is performing a similar trick. The idea that the entirety of government spending should be subject to the approval of unelected "advisors", simply to appease the markets, is an enormous extension of the same principle.
posted by Meaders at
11:50 am
