Despite IFS criticism, the Tories will have the last laugh
The Institute of Fiscal Studies (IFS) has spoken. They are certainly a clever bunch, feared across the political spectrum and venerated by the mainstream media. But there is something amiss when political debate is reduced to the question of whose sums add up.
It is on this basis that I opened the IFS’s manifesto analysis – and surveyed the media storm it inevitably whipped up – with a degree of scepticism. The people of course deserve to be told the truth; it is absolutely right that parties’ fiscal plans are subject to expert scrutiny. But does anybody really believe that any party can engineer precisely what public spending and borrowing levels are going to be five years from now? These documents offer us a sense of the character of a particular party’s approach to government. The specific measures they contain – and certainly the numbers attached to these measures – have to be taken with a pinch of salt. And this, as Jonathan Portes has argued, that the value of the IFS analysis is limited.
I am not saying that we should accept the culture of misdirection that characterises how our politicians speak to us. But the IFS analysis – unwittingly, for the most part – goes much further than correcting falsehoods and exposing ambiguities. In presenting itself as the objective umpire of fiscal policy, it disciplines our politics. Ostensibly, it does so on our behalf, to minimise the extent that we are being misled. But in doing so, it disciplines us. When political life is reduced to whichever party is most responsibly stewarding ‘taxpayer money’, it is our own ability to reshape the world around us that is most undermined.
What is implicit in the IFS account – and, indeed, often made very explicit – is that some parties are more responsible than others, within a general context in which irresponsibility is the norm, or at least too frequent. I have to admit, I was intuitively pleased to see the Conservatives being chastised by the IFS for the £30 billion ‘black hole’ in their spending plans. They have also been strongly criticised for not providing sufficient detail on the cuts they intend to make to the welfare state.
But hang on a minute: isn’t this a good thing? I don’t want the next Conservative government to cut the state back to its bare bones! I don’t want there to be any more cruel and self-defeating cuts to welfare! If they are not being completely honest about the fact that they are not going to do it, we need to be screaming very loudly that this probably proves that the Keynesians critics of austerity were right all along. It won’t be done, because it can’t be done.
Instead, the logic of the IFS position is that only the opacity, rather than the absurd and impossible policy agenda, represents irresponsibility. This is what happens when we let accountants pass themselves off as economists. It is bad enough, as Ha-Joon Chang has been saying for years, that we have been letting economists pass themselves off as economists.
This is a quite serious point. The IFS accepts as given a series of macroeconomic assumptions that we know are, in realty, highly speculative. For example, all of the parties’ fiscal plans are judged based on the same assumptions about productivity growth (and the impact this has on earnings and profits, and therefore tax revenues). But productivity is profoundly affected by the things governments do, and the things governments do are reflected in the levels of spending and borrowing that they expect to preside over. The Conservatives have been consistently forced to prolong austerity because their policies have, in my view, undermined the economy’s productive capacity. If that continues to happen, the £30 billion black hole will get even bigger.
Equally, it is entirely possible that Labour or the Scottish National Party’s slightly alternative approach to fiscal policy will lead to productivity rising more quickly. They will be better at austerity because they will mitigate the need for it.
Depressingly, while the IFS has today criticised the Conservative manifesto significantly more than its rivals, the whole charade actually plays perfectly into the wider Conservative strategy around delegitimising the state’s macroeconomic functions. This is precisely why George Osborne established a mini-IFS within the Whitehall machinery in the form of the Office for Budget Responsibility (OBR).
The OBR, especially under the leadership of former IFS chief executive Robert Chote, has frequently questioned the credibility of the coalition government’s fiscal agenda. Yet every time they do so, they reinforce the sense that citizens cannot trust politics. Only the accountants are on the side of taxpayers. The Conservatives may lose the occasional battle, but by legitimising their anti-state, pro-market ideological perspective, the OBR and IFS are ultimately helping the Conservatives win the long war that really matters – who gets to define what is wrong with our economy, and what needs to be done about it.