Wednesday, November 02, 2005

Fiscal Fink Funk

Under the SDP knockabout headline "A David Davis guide to fiscal strategy: two and two make . . . um, er . . .", Danny Finkelstein uses his Times column to lay into DD's policies for managing tax and spend. Well, he doesn't really lay into the policies as such- more a pantomime version of them.

We've already posted at length on why DD's right and DC wrong on this, but let's quickly pick up Fink's main points:

a) "Public service the short to medium term, and certainly during the period covered by the Davis tax plan, it is very likely to cost money rather than save it". Depends entirely how you do it- the highly successful Swedish Schools reforms ( now promised by DD for us) actually set the value of the education voucher transferable to the independent sector at 85% of the pupil cost in the state sector.

b) "By eccentrically deciding to write his March 2014 Budget in October 2005, David Davis is unable to [calculate how much he needs to reduce borrowing]. So he promises to return in tax cuts every penny he saves. This is — how can I put it? — not a very good idea." Fink ignores two things. First, DD's policy is first and foremost about adopting a rule to govern spending- the specific numbers just happen to drop out of it. Second, all governments with any sense do medium term fiscal projections (see HMT's Budget). In fact, as we've said elsewhere, the idea of tinkering with fiscal balances on a short-term annual basis is these days seen as- how can I put it?- not a very good idea. Even Gordo grasped that with his Golden Rules (although admittedly he's never quite played the game honestly).

c) Er...that's it. Fink entirely ignores the point about tax cuts stimulating growth and therefore tax revenues and therefore public spending. Ah well.

It's very interesting where the SDP diaspora have landed. The LibDems have got Chuck, Labour have got Lord "Policy Wonker"Adonis, and we've got Fink. It's a funny old world.


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