I’m sure that I have more than a vague memory that in the last two UK general elections the winning party told us that eliminating the deficit was absolutely essential and that the sky would fall in if we didn’t. Something along those lines anyway. After the first of those elections, they told us it would have to be done by the end of that parliament, and their then best mates the Lib Dems agreed with them, albeit whilst quibbling about some of the details. And after the second of those elections, they told us it would have to be done by the end of this parliament, and that it would be a lot easier without needing to have those little quibbles with their now former best mates.
Yesterday, they told us that actually, that wasn’t necessary either, and it doesn’t matter if the target isn’t achieved in this parliament – indeed, it doesn’t even matter if there’s no longer any particular target date. Inevitably, they are blaming – in part, at least – Brexit, the argument being that a change of circumstances leads to a change of policy. The funny thing is, though, that I don’t remember them saying in either of those two elections that there was any dependency on any particular set of circumstances or events; the need was both pressing and absolute.
Those of us who suggested that this was all much more to do with ideology than economics were dismissed as spendthrifts, and the media – particularly the BBC – did its bit to support what was then the orthodox position by hostile questioning of any politician who had no plan to eliminate the deficit. Labour, as usual, caved in to that pressure and agreed that the deficit needed to be eliminated, arguing only about the timescale and method.
But what yesterday confirmed is what some were saying all along. Firstly, the deficit isn’t something which exists in splendid isolation regardless of economic circumstances – its existence and size inevitably vary over time depending on the point in the economic cycle. It was always economic madness to seek to eliminate it at a time when the economy was weak. And secondly, the government’s finances are not like those of a household. Within limits, it really is possible to run a deficit more or less indefinitely, depending on a range of factors including the rate of economic growth and the rate of inflation. I can understand why that ‘feels’ wrong to so many people, but ‘feeling’ wrong doesn’t make it actually wrong.Blaming Brexit is something of a soft option, allowing the government a fig leaf to cover a policy U-turn. But it’s only a partial U-turn, in the sense that whilst policy towards running a deficit has changed, policy on who should benefit from government actions – and who should pay the costs – still looks remarkably consistent with that of the previous government. On that score, only the rhetoric has changed.