Responsible Labour, reckless Tories – Mainly Macro

Chris Giles, economics editor of the FT, wrote an interesting opinion piece a few days ago, writes Professor Simon Wren-Lewis.

It appears at first sight to be an attack on Labour’s record in opposition. But it ends with “the intriguing thing about Mr Miliband’s Labour party is that its broad economic prospectus for the 2015 general election is perfectly sensible.”

In contrast “the Tories’ plans appear ideological and border on calamitous for many public services.” If you want more detail on this, see my debate with Oliver Kamm in Prospect magazine.

So his article is a form of puzzle: how did responsible Tories and reckless Labour change places?

One possibility, of course, is that there never was a puzzle. Chris lists many alleged failings by Labour, but a lot look superficial and presentational to me.

Furthermore (and I know Chris will not want to admit this) when Ed Balls said Osborne was cutting too far too fast, he was right. In particular, public investment (school repairs, flood prevention) was cut immediately when there was no need to do so to meet the coalition’s fiscal rules.

Those who think it had to be done to appease the market should reflect on the fact that Britain lost its AAA rating because of weak growth, and pretty well everyone thinks that public investment has the largest GDP multiplier.

More on this is at Mainly Macro – please give it a visit.

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3 thoughts on “Responsible Labour, reckless Tories – Mainly Macro

  1. paulrutherford8

    According to Osborne [I think], when our loss of AAA status was pointed out during the debate on 13/01/2015, he said it was ‘only with some agencies’. No acknowledgement of losing AAA status with *any* ‘agency’ being detrimental to the UK.

  2. Andy

    However much I dislike George Osborne, he is an elected representative – the credit ratings agencies (CRAs) are not. They hold immense power over governments. There are only three CRAs that really matter – Moody’s, S&P and Fitch. In 2010 they downgraded Greece, Portugal and Ireland’s credit ratings to ‘Junk’; because of this they actually accelerated their financial crises. Our credit rating has only been downgraded slightly to AA+. Some have said that these CRAs should be public utilities.

    1. Mike Sivier Post author

      These agencies set their ratings according to confidence in each country’s economy – but whose confidence? As it happens, the decisions are based on the judgement of whoever’s in the room when they meet to discuss the matter – and no questions are asked about their political allegiances.
      The whole set-up seems extremely Moody to me. Standards seem Poor… I can’t think of a wordplay involving ‘Fitch’.

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