The FT’s odd changing line on fiscal stimulus
Back in June 2010, the government’s first budget was broadly welcomed by an FT leader. However it also warned that:
Mr Osborne’s plans make sense only so long as the OBR’s own growth forecasts are correct.
Given the risk that he could be wrong, the FT argued that he should have left an “escape hatch” – the wiggle room for temporary fiscal stimulus if need:
It is to be hoped that if circumstances require it, he will show flexibility and use temporary fiscal measures to counter a slump
Those OBR forecasts have turned out to be wildly optimistic. The economy today is smaller than when the Coalition came to office and forecast for 2012 and 2013 are being slashed.
The risk of a ‘conventional recession’ has materialised. Surely then the FT editorials should be urging the Chancellor to “show flexibility and use temporary fiscal measures to counter a slump”?
Given what the FT was arguing two years ago, it came as a great surprise to read yesterday’s leader:
Britain continues to enjoy the confidence of markets, in part due to the coalition’s solidarity on public finances. Any sign of fracturing on fiscal policy could cost the party and the country dear.
Two years ago the FT argued that if the UK found itself in recession the Chancellor should ‘show flexibility’ and use ‘fiscal measures’ to get the economy moving. This week it argues that there is no alternative but to stick to austerity.
The FT is a superb paper with many excellent writers, but this line is very depressing.