I am one of those people who go around saying ‘You know what, if that Ken Clarke was Shadow Chancellor my decision to not be a Tory would be much more difficult. That Ken’s alright. Knows how to cut a deficit, does Ken, and did it with a chuckle’. That sort of thing.
And he is not afraid of speaking economic orthodoxies at a time when every commentator seems to be going all nef.
Which makes it all the sadder to see how he has gone a bit doolally about the IMF and a need to support the UK if there is a hung Parliament.
“Sterling will wobble. We have seen even minor flickers in the opinion polls causing problems with interest rates in the recent past. If the British don’t decide to put in a government with a working majority, and the markets think that we can’t tackle our debt and deficit problems, then the IMF will have to do it for us.”
Really? When in the recent past have we had problems with interest rates?
Ironically, Anatole Kaletsky in the Times provides an indirect explanation for why the IMF is not going to be needed now (ironically, because it is in a column pointing out how difficult things would have been had we been in the Euro. Fair cop; that would have been a bad call). Here is Anatole:
Why, then, are financial pressures so much more intense in Greece? Mainly because the British Government borrows in its own currency and can therefore simply print more money in order to repay its debts if required. This, in fact, is exactly what the Bank of England did last year, creating new money to the tune of around £170 billion. The ability to print money can create inflation if the Bank of England miscalculates; inflation rose to 3.4 per cent in March. But the independence of monetary policy gives the British Government a freedom to set taxes and public spending in response to the decisions of British voters, instead of the demands of international organisations or bond market investors
We borrow in sterling, we are legally allowed to print sterling. If the IMF were called up to ‘help us out’ they would look rather quizzical, search through the locker for some pounds, and then turn around to us and ask for them. Yes, this was the situation we were in back in 1976 – but back then, with inflation running at 15% or so, money-funding the deficit was adding fuel to a fire – whereas now it is a generally popular stimulative tool (read my piece on QE).
Of course, we expect Osborne to join such hysteria (watch this debate; Darling does well IMHO; Vince’s point about cross party consensus is bang on as well). George has form from November 2008 (Google ‘sterling crisis’. In fact, from my past, deep research techniques, you get a whole bunch more hits for Osborne and Sterling Crisis than for Osborne and Quantitative Easing. Which I think is telling).
But from sensible, pragmatic Ken? Tsk. There must be something funny in those big cigars he likes to smoke.