Blog : Monetary Policy Forum

Getting structural about the deficit

On 10/03/2010, by Danny Gabay. Keywords: Monetary Policy Forum, Deficit

Chris Giles, Economic Editor of the Financial Times, accuses us (and others) of "succumb[ing] to the spurious precision of the structural deficit disease" in his blog. He was referring to the article we wrote and which was published by The Daily Telegraph earlier in the week (see here).

Chris's article is as ever thought-provoking and he raises a critically important issue. As he says, the main thrust of our argument about the parlous state of the UK's public finances revolves around the fact that the so-called structural deficit is not only the biggest on record but also expected by the OECD to be the biggest among the major economies in2011. But, as Chris points out, neither we, the OECD or indeed HM Treasury actually know how big the UK's structural deficit is. So, maybe we're all worrying about nothing?

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Britain's record deficit: a real diagnosis and solution

On 10/03/2010, by Danny Gabay. Keywords: Monetary Policy Forum, Deficit

The UK’s public finances are in a dreadful state. That much is not in dispute. Many other countries are in trouble, but few are in quite the mess the UK is in. Unfortunately, the debate about what should be done and when has generated a lot of heat, but so far shed little light on the matter at hand.

One hundred of the country’s finest economists have put pen to paper to offer three alternative views, which for so many economists is not a bad return, but is still not very helpful. For all the sound and fury, they disagree on very little of substance. In the final analysis we are talking about a few tenths of a percentage point of GDP here, and perhaps the odd quarter there, in terms of timing. Much the same could be said of the main political parties

So, what should be done? To read the full article – published by The Daily Telegraph - please click here:

http://www.telegraph.co.uk/finance/economics/7353209/Britains-record-deficit-a-real-diagnosis-and-solution.html

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