1. Failing to read up on blogs for a week leaves a person precisely 0% less informed. I should do that more often.
2. I’ve been asked by a few people what I think of the Conservatives’ National Insurance proposals. Now, you will recall I was confused about how they were funded. And like David Smith I don’t get how this has not struck a hammer blow against their repuation as the great fiscal hawks, defenders of Britain’s cherished AAA-ness. This is what Smith writes:
Let us be clear. Had the chancellor announced in his budget that he was forgoing £5.6 billion of the planned revenue boost from raising NI in April 2011, making up the lost receipts with additional and unspecified efficiency savings, he would have been pilloried. So how did Osborne get away with it?
He goes on to ponder three possibilities.
My view is this: if they didn’t like the NI rise, and thought it was the worst of all tax rises to fund a deficit (because you can always raise some sort of tax), they should have leapt up and said so in December, when it became policy. If they had the stones, they should have announced there and then that they preferred VAT, and put some real blue water between them and the Labour party. The delay, during which they fumed about the deficit, did nothing to make their position more credible. But I do think economically the Tories’ position stacks up. My criticism all along has been that obsessing on the deficit, regardless of what is done to cut it, makes no sense: not when the gilt market is quiescent and the deficit is quite obviously not crowding out anything. Their position should have been:
“We think the deficit needs to be tackled. But this does not mean any kind of spending cut, any kind of tax rise. To raise NI takes deficit-fetishism too far, and we the Conservatives will strain every ligament* to undo it, rather than taking it as a fact. Because if you hit growth and employment, you end up hurting your debt position anyway”.
I think this is where the Tories are now – and where I suspect Darling would have wanted to be, too, preferring a VAT rise, which I think is more efficient, quicker, and where the regressive effects can be compensated through benefits. So the Tories have a coherent policy, but one that they utterly confused by acting as if nothing was more important than deficit reduction. Once again, they blew a chance to construct a decent economic attack on Labour – but perhaps the campaign gives them a second chance.
3. Bond Vigilantes are not worried about a hung parliament. Read the whole post.
The critical thing about the UK election from a bond (and currency) investor’s perspective is the resolving of uncertainty over the future of economic policy. This is where the Liberal Democrats can increase or remove uncertainty and thereby extend or remove the UK risk premium based around the election. I think the latter alternative is the obvious political choice. . .. the one thing that Clegg can not do (despite being Born to Run?) is ask the electorate to vote again, because as the weakest link he would be eliminated if the electorate was forced to choose between the other two parties in traditional two party British political fashion, resulting in the Liberal Democrats losing seats and influence. Therefore a hung parliament is not likely to lead to further indecision, and delaying of policy implementation, but like a clear victory, even a hung parliament should provide a catalyst for change, and a collapse in risk premiums that could benefit both Sterling and the Gilt market.
Now I shall be attempting (see this Map) to do Nagens down to Scanisnas, up to Mutta, down red 23 up to La Siala, then after doing 10 as a warmup, trying black 26 onto blue 27 down to Fuorcla. Then, the big decision is: coffee at Vorab or Crap Massegn? Tough one. Now you know where to send the heli-ambulance.
*the first analogy that came to mind. I hope it is not bad luck