Friday, April 09, 2010

Of course their bloody sums don’t add up

The parties are arguing, with desperate earnestness and pitiful fury, about whether each other’s ‘sums add up’. And they’re conducting this argument while all standing on a huge cloud made out of guesswork, evasiveness, ignorance, wishful thinking, secrecy and fiction.

There are two reasons for this miserable predicament.

First of all, Labour’s published plans (such as they are) contain a colossal amount of vagueness. However, because they’re in government, and can publish their numbers on Treasury headed notepaper, these count as ‘official’ and get treated as the baseline against which everyone else gets measured.

Look at this chart from the IFS, showing the government’s proposals for fiscal consolidation:

The green sections in the final two years represent ‘unknown’ changes to tax or spending to reduce the deficit. But there’s more doubt than that: Labour have not done much to explain in detail how the rest of the reduction will be done, other than to say what will be tax rises and what will be spending cuts (although they’ve been clearer on the former).

Then there are the Tories and Lib Dems. If they want to reduce the deficit faster than Labour, they thereby inherit all the uncertainty in Labour’s plans plus any extra uncertainty about the further work to be done. So they’d have even more to explain. They have given some details here and there, and indeed the recent bickering about Tory efficiency savings and National Insurance is to do with the moderate extra vagueness that’s been piled on top of the big underlying vagueness.

So we don’t really know how any of them would do this. Do they?

And none of them can attack the others for ignoring the scale of what’s needed, because of the Fart Principle: whoever raises this problem will be saddled with the burden of explaining their – painful – solutions first (or, in playground parlance, whoever smelt it dealt it).

The second reason that the ‘sums add up’ debate is a mutually convenient charade is that, as Helmuth von Moltke didn’t quite say, no fiscal plan survives contact with the economy.

Economic predictions rank somewhere between meteorology and astrology for their accuracy. As Chris tells us, even in economic good times, Treasury deficit forecasts for the year ahead are out by over £6 billion half the time (and by over £12bn a quarter of the time). For comparison, this week’s spat is about the Tories wanting to use £6bn of extra efficiency savings this year to cut the deficit.

For the year after, forecasts are out by over £15bn half the time and over £21bn a quarter of the time. And three years away? Four? Don’t ask.

So even if all the parties had reams of precise tax and spending plans, audited by the IFS and Stephen Hawking, they’d still be largely hypothetical. And, of course, no party wants to be the one to say they only have the dimmest idea of how their proposals would really work out. They need to project an image of certainty, and the media enjoy judging them harshly for failure – while mostly ignoring the impossibility of the whole enterprise.

1 comment:

Liam Murray said...

Great post. I'd wanted to write a "they're all pretty much making it up" post but you've done it better that I could've anyway...