Nick Clegg was given a tough time by Justin Webb on the Today programme this morning about the timing of his change of heart on the timetable for deficit reduction. His justification for switching from being a Keynesian to a deficit hawk does not stack up.
Nick Clegg repeatedly told Webb that, “What we said was that the timing of deficit reduction has to be governed by economics.” During the election campaign, the Institute for Fiscal Studies examined whether the Liberal Democrats were “planning to be more ambitious than Labour in reducing the deficit”, concluding:
“If anything the manifesto implies the opposite: it says that a Liberal Democrat government would carry out a Spending Review over the summer and autumn ‘with the objective of identifying the remaining [our italics] cuts needed to, at a minimum, halve the deficit by 2013-14′.
“At face value this might suggest a less ambitious plan to reduce the deficit overall than that implied by the forecasts in the Budget. The Budget predicted that the deficit (total government borrowing) would be down to 5.2% of national income in 2013-14, whereas halving it means that it need not be reduced below 5.9% of national income (half the 11.8% forecast for 2009-10).
“But the Liberal Democrats tell us that this promise to “at a minimum, halve the deficit” should be taken as shorthand for matching the deficit reduction path set out in the Budget. So, overall, they are no more or less ambitious than the Government.“
And just five days before the country went to the polls, Nick Clegg – when asked by Reuters about the Conservative party’s plans – said:
“Us siding with Labour? It’s siding with common sense.
“My eight-year-old ought to be able to work this out – you shouldn’t start slamming on the brakes when the economy is barely growing. If you do that you create more joblessness, you create heavier costs on the state, the deficit goes up even further and the pain with dealing with it is even greater. So it is completely irrational.”
The Lib Dem leader claimed on Today that he changed his mind because “The economic circumstances [became] more perilous.” He referred to “a climate of sovereign debt crises”. Presumably this meant the Greek crisis which had been rumbling along prior to Clegg’s Reuters remarks. Indeed, contagion was already taking place in late April. On April 28th, after two days of turmoil in global markets, OECD secretary general said:
“It’s not a question of the danger of contagion; contagion has already happened.”
Since the election, far from circumstances becoming “more perilous”, economic news has painted a mixed picture. While business confidence is down and the claimant count increased last month, consumer confidence is up, the yield on 10-year gilts hit an all-time low while the jobless total has fallen.
Clegg, of course, has form. He initially claimed that he had changed his mind as a result of a conversation with Mervyn King after the election – a point on which he later recanted claiming, “I changed my mind earlier than that.” When exactly remains unclear.