Thursday, March 13, 2008

Uncertainty and public borrowing

Here’s a list of the things that can affect public borrowing levels:

  1. Government policy.
  2. Almost anything else.

As he so often does, Chris takes out his well-sharpened crap-cutter and cuts through the crap:

Darling was repeatedly asked: why should we believe your forecasts for public borrowing? His answer was pretty much wibble. But the thing is, there's an answer which is both consistent with reasonable economics, and which defends him. It runs roughly thus:

You shouldn't believe my forecasts. Forecasts for public borrowing have always been subject to huge margins of error. There's a rule of thumb, which dates back at least as far as Nigella's dad, which says that the average error is 1% of GDP for each year of forecasting horizon… That means my forecast for net borrowing of £43bn next year should read £28-58bn, and the £38bn for 2009-10 should read £8-68bn, with a roughly one-third chance of borrowing being outside these ranges.

But the thing is, Darling didn't say anything like this. He preferred to give the impression that he's on top of things, rather than give an economically coherent answer. Which is why I hate Budgets. They are part of a folie a deux, in which both Chancellors and their media interlocuters pretend that it's possible to manipulate the public finances in detail. But the truth is that Chancellors don't have such control.

So, the next time you hear a politician burbling about the ‘black hole’ in their opponents’ spending plans, bear in mind a different (and equally iffy) physics metaphor: the uncertainty principle.

1 comment:

anticant said...

Chancellors of the Exchequer are a breed of witch doctors. All they are good for is hurling incantations into the air, claiming spurious credit if things go more or less as they predict, and saying "It weren't me, Guv" if they don't.