David Cobham's picture
Affiliation: 
Heriot Watt University
Credentials: 
Professor of economics

Voting history

Prospects for Economic Growth in the UK April 2014

Question 1

The long period of slow or negative growth might imply that there is a substantial output gap in the UK economy.  Do you agree that there is currently a larger output gap than the OBR estimate to the extent that the shortfall in output relative to capacity is 3% or greater?  

Answer:
Strongly Agree
Confidence level:
Very confident
Comment:
A note of caution is that this greater than 3% output gap could not be closed overnight, but it is still a shortish term matter rather than a medium or long term one.

Responsible long-term fiscal policy (pilot survey)

First question:

To help ensure that advanced country governments have sufficient flexibility to respond to future crises, it is important that finance ministries aim for a ratio of public debt to GDP that is substantially less than 60% in normal times.

Answer:
Agree
Confidence level:
Confident
Comment:
My view is that a ratio of around 40% (gross) would be an appropriate target, but it is important to say that this should be attained gradually over a period of 'normal times', and the target should not be used as an excuse for more austerity now.

Second question:

To help ensure that advanced country governments pursue responsible fiscal policies, countries should adopt formal rules for limiting structural deficits, which are supported by primary legislation or constitutional reform.

Answer:
Neither agree nor disagree
Confidence level:
Confident
Comment:
I have two reasons for neither agreeing nor disagreeing. The first is that the measurement of structural deficits is so difficult that it is open to abuse as well as innocent errors, and the latter can be enormous - e.g. the OECD's estimates in successive Economic Outlooks for the UK's structural deficit in 2007 have risen from below 0.5% (2007 estimate) to 4.9% (2013estimate). Second, trying to incorporate such limits in legislation is partly petty politics (trying to provoke the opposition) and partly dubious economic policy (trying to fix policy for all future time, in a way that ignores possible shocks and trends). It is better to argue out the need for appropriate constraints in a democratic way, which means convincing and reconvincing successive generations of politicians and electors, and accepting that in an uncertain world governments just have to allowed to exercise at least some discretion.

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