Sunday, 26 October 2008

Urbis et orbe

The Mais lecture is often used to signal important changes in economic policy: in 1984 Nigel Lawson used it to turn the traditional distinction between macroeconomic policy and microeconomic policy on its head.

Alastair Darling's lecture has been delayed by events but it will take place at City University on Wednesday. The intention is to try and halt the slide in sterling by emphasising that the Government is serious about slowing down public spending.

All well and good, but one can't invoke a new sainthood for Keynes as the Chancellor did last week (aided by noises off by his biographer Robert Skidlesky) and at the same time proclaim that public spending is to be brought under control. Of course, the Government is making plans for an early sale of bank shares, but the stock market will have to recover first. At the moment we have panic all round.

The question with any public expenditure cuts is 'where?' and the answer is usually 'misery all round'. Except that one can't (Philip Snowden notwithstanding) cut benefits and public sector salaries without upsetting a large bloc of voters. It is simply not a politically viable option. And it's not easy to touch primary and secondary education, health, law and order and defence.

It will be interesting to see whether the Chancellor's speech has any specifics about where falling tax revenues might be offset.

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