UK politics blog connoisseurs may remember Duncan's Economic Blog, which ran until last December before abruptly vanishing. It turns out the author was under radio silence due to working for the Labour Party. Rather than taking this as the cue for a period of silent reflection post election he's resumed blogging and fortunately for sanity and the concept that there might be more than the 'cut now cut hard no alternative' agenda he's started in with a good reading post on economic forecasting and the implausability of the OBR's estimates. In the light of the OBR's chief budgie having flown the coop this is something worth keeping an eye on.
Consumption – the OBR is forecasting consumption to grow at a much faster rate than disposable income, this is driven by a falling household savings rate. I suspect the savings rate will hold up higher as households repair stretched personal balance sheets and banks remain unwilling to lend to finance consumption on anything like the scale we saw pre-recession.
It's interesting to contrast this assumption of *decreasing* savings with the moralist wing of the Coalition making noises about the desire to get people saving more:
“We do not save enough in this country, it is shockingly bad when it comes to how much we save.
“It has become unattractive to save. It is appalling, and changing the culture is critical.”
It's a common Conservative tic, this - mindless chavs spending on credit caused this crisis, therefore turning them into virtuous decent savers will fix the world. Savers also demand low inflation and high interest rates and a strong pound, three further Tory tics that just right now would be as welcome as a Gove in a trifle. The final conclusion is essentially a UK version of the Krugman Hypothesis - too little stimulus plus over-hasty consolidation leading to sluggish private sector growth, substantially higher unemployment maintained for long periods and a consequent failure to meet the deficit reduction targets.
Meanwhile, Whitehall Watch continues to be a strong candidate for Coalition Least Missable, with a decent double punch at the floundering Gove and the is-it-independent-or-what OBR travails. It's notable that a week of dodgy headlines all connected with an air of not having thought this all through has not, as yet, cured the Coalition of their penchant for batshit insane PR-based policymaking from Francis Maude. I think we need to have a closer look at Mr. Maude, who is a lot more powerful than his profile.