Wednesday, 10 June 2015
The false god of the OBR
I really don't get George Osborne. He is lauded nowadays as the great political genius and strategist, as well as a canny Chancellor.
In reality his 'Plan A' was no mathc for the markets of 2011 and the Euro crisis, he quickly switched to more or less following Ed Balls' plans for the rest of the Parliament. This was a wise choice, but highlights again how little real difference there is in the managerialist approaches of our political parties.
Now, with a Tory majority and 'long-term economic plan', he is considering scrapping the Bank levy and writing into law that Budgets must be balanced in times of plenty.
I am vehemently against the reduction in the Bank Levy, this has done a good job of concentrating bankers minds on not over-stretching their balance sheets - the single main cause of woe in 2007/9. Also how stupid to cut taxes for Bankers as a priority, poor politics on the lines of the 2012 budget omnishambles. If corrupted HSBC would rather be in China then good riddance to it, let's see how the execs due against the firing squads when the Politicians turn against them there. You only have to read my post of Monday this week to understand how dangerous the business environment is in China.
The worst call of all though is this 'fix the roof whilst the sun is shining.' On one level I agree with it strongly - the national debt is unsustainable and a multi-decade effort of restraint is called for, we are nearly 10 years into the first one and the job is less than 40% done.
However, to say the OBR should be the repository of judgement as to when the economy should be balanced or not is just silly. The OBR got growth targets wrong in almost every year of the last Government. Some years over-estimating and some years under. Markets move very quickly - not at the moment heightened tension as Grexit is now 50/50 and China rapidly slows.
To accredit an independent body to regulate a Government's finances is bizarre, more so when it is one that has a brief and not very glorious history. Why not ask the Bank of England, or the IMF?
When a crisis hits all such planning goes out the window. Most economists and the Government did not see 2008 coming. They wont see 2015, 16 or 19 coming either, its the way of the market. To try bind them in such a way is illogical.
People in the UK voted, just, for more austerity. The Government can enact its will for 5 years. If the people then vote for the nutters who want to splurge, so be it. Trying to legislate in this way is anti-democratic.