Hamish McRae, one of the few economic commentators whose reputation has been enhanced by the current crisis, has a fantastic column
in The Independent today. In it, he argues that to get out of the economic mess of the 1970s we had to work out how to produce monetary discipline and that we now have to find a way to ‘impose fiscal discipline on governments’. Indeed, the real test of the Tories in government on economic policy will be whether they are able to do this. If the Office of Budget Responsibility has real teeth, then it could be one of the most important changes to the institutional framework of government in a long time.
P.S. This from McRae’s column illustrates the need for fiscal discipline:
The UK will go up from a national debt of 40 per cent of GDP to one between 80 and 100 per cent. So the price of combating a recession that will in all probability be less serious than that of the early 1980s (though worse than the 1970s and 1990s) will be a doubling of the national debt. That can never happen again. When the next recession comes, in say 2018, we will still be paying off the cost of the present one.