Sometimes the real economic gamble is sometimes too little government borrowing – not too much

With his dad jokes and fetish for spreadsheets, Philip Hammond does not fit the stereotype of a “gambler”.

But the Institute for Fiscal Studies (IFS) nevertheless argues that the chancellor rolled the dice in last week’s Budget and took a rather risky wager.

Instead of using his lower borrowing projection “windfall” from the official independent forecaster to reduce the deficit more rapidly, Hammond essentially spent it all on the health service, while leaving the overall path of government borrowing more or less unchanged.

He could have had a projected budget surplus in five years’ time, but instead there’s still set to be around £20bn of borrowing in 2023-24.

Virtually the entire UK news media took up this “gambler” theme in their headline coverage of the aftermath of the Budget.

Yet we should be extremely wary of this framing. Because it obscures the crucial truth that, in economics, the gamble is sometimes borrowing too little, not too much.

The IFS, to be fair, was using the phrase in a narrow sense of the chancellor jeopardising his chances of meeting his own self-imposed fiscal rules.

Those Office for Budget Responsibility (OBR) borrowing downgrades – whose origins remain mysterious given the official forecaster hasn’t upgraded its nominal GDP or growth forecasts which would be the most obvious explanations for higher than expected tax receipts lately – could very well be reversed in future budgets.

Since 2010, most underlying borrowing revisions have been negative (implying more borrowing than previously expected) rather than positive for the public finances.

What the lord of forecasting (in this case OBR director Robert Chote) giveth, he can also taketh away. He even warned as much last week

And what would happen then? Would Mr Hammond really try to hike taxes while the government is walking the tightrope of a hung parliament? Would he cut public spending when the prime minister has told the country that austerity has ended? Isn’t it more likely that the result would be more borrowing? And what would happen to his fiscal rules then?

All this raises the question of whether or not the chancellor’s fiscal rules are sensible. If a man had resolved to jump off a building, we wouldn’t describe a decision to place obstacles between himself and the ledge as a “gamble” because it might mean him not achieving his suicidal goal.

Hammond’s rules, including a deficit below 2 per cent of GDP in 2020-21, are not suicidal. They are far less economically destructive than those of his predecessor George Osborne, who was insisting on running an absolute budget surplus in 2019-20, ignoring the advice of just about every independent public finance expert.

Yet there are other fiscal rules available. There is no reason to believe Hammond’s represents perfection. Indeed, it’s quite possible for a country to borrow indefinitely and still see the debt stock as a share of GDP decline provided (roughly) that the growth rate is higher than the deficit as a share of output.

Labour’s own fiscal rule targets a day-to-day budget surplus in five years’ time with a suspension if interest rates are still stuck close to zero, meaning monetary policy and the Bank of England cannot reliably help to boost growth if we go into recession.

That’s a perfectly reasonable rule, consistent with stable public finances, and one which requires less consolidation – and allows more near term borrowing – than the Chancellor’s.

And then there’s the state of the overall economy to consider.

The OBR judges that there is now no slack in the UK economy, suggesting any additional borrowing would be inflationary. But the OBR may well be wrong about that. Several other credible forecasters think there remains an output gap. Oxford Economics puts it at more than one per cent.

And even if we were to accept that the economy is running roughly at capacity, an output gap could easily open up again if we have a chaotic Brexit. At that stage additional public spending will be an economically stabilising influence, just as it was during the last recession.But the media’s wholesale adoption of the “gamble” framing from the IFS briefing, and the failure to put it in the specific context of the chancellor’s own chosen fiscal rules and the neglect of all questions of macroeconomic management, is evidence of what the Oxford professor and magisterial economics blogger Simon Wren-Lewis has rightly called “mediamacro”

A key element of mediamacro is the naive assumption that higher government borrowing is inherently dangerous and that lower borrowing is always praiseworthy.

This is a rule of thumb used by far too many political journalists, commentators, presenters, editors and producers. Some of them do it for ideological reasons, out of their desire for a smaller state and tax cuts. Some lazily accept the framing of politicians. But most ubiquitous and dangerous are those who consider themselves to be neutral and non-partisan yet still drift into looking at fiscal policy through this distorting prism.

It’s depressing and really rather shameful that after a decade of well-documented macroeconomic mistakes across the western world, it’s apparently still necessary to restate the truth that a national economy cannot be usefully compared to a household, and that the only kind of economic “gamble” some seem able to recognise is the one where the risk is more borrowing.

Tory actions speak louder than words on social housing

"I don't understand why you keep going on about the need for more social housing - it just creates Labour voters."

Nick Clegg doesn't recall whether it was David Cameron or George Osborne who uttered these words.

But he knows it was one of them. Why? Because he was sitting across the table from them in one of the coalition's "guad" meetings when this nugget of unguarded Tory honesty slipped out.

The former deputy prime minister is in no doubt that this represented the cynicism-drenched view of the Conservative leadership on social housing and its residents, going all the way back to Margaret Thatcher's Right to Buy revolution in 1980.

Have things changed? Ministers, scarred by the eruption of anger over the treatment of social housing tenants and government housing policy in general in the wake of the Grenfell disaster, want us to think so.

"Regardless of whether you own your home or rent in the social sector, residents deserve security, dignity and the opportunities to build a better life," says the communities secretary James Brokenshire.

The new green paper on social housing talks of "tackling stigma", "empowering residents" and "ensuring homes are safe and decent". All sorely needed. But then there's the kicker: "expanding supply".

What better way for the Conservatives to bury the perception that they secretly regard social housing tenants as Labour-voting deadbeats than by creating more of them? But will they? Despite colossal pent-up demand - more than a million households have been on social housing waiting lists for at least a decade - the coalition deliberately ran down construction rates of homes for social rent.

The Conservatives, governing alone, have carried on with the policy since 2015. Official figures show that just 5,380 new homes for social rent were created in 2016-17, down from around 40,000 in 2010-11.

Cameron and Osborne devised a new category of social housing called "affordable rent", which essentially means subsidised housing that is more expensive for tenants without being quite as dear as open market rents. It was essentially an indirect means of reducing government funding for social housing (although it didn't contribute to cutting the deficit because it simply meant tenants needed to claim more in housing benefit to pay their rent).

The supply of new affordable-rent homes rose from zero in 2010-11 to 24,350 in 2016-17. But even if one adds new affordable rent to new social rent the supply of subsidised rental housing is still around a third lower than it was six years ago.

Kit Malthouse is the new housing minister, the eighth in eight years. He admitted yesterday that the annual supply of new social rent housing by 2021 is not likely to rise above 12,500. Which is not terribly surprising given the government, despite many flashy pledges of new funding, has not announced any major additional grants for social landlords to enable them to ramp up construction.

And the Treasury is still resisting pleas to scrap the borrowing limit on local authorities, something needed to enable them to start building council housing in serious volumes again, as they did between the Second World War and the 1980s.

There is a vigorous debate taking place among economists over whether increasing national housing construction rates to 300,000 a year, as the government is targeting, will actually have a significant impact on house prices. But regardless of the impact on house prices, it's clear that the UK needs more and better quality social housing, whether from housing associations or councils.

There are some 80,000 households in temporary private accommodation because councils cannot house them permanently, up 64 per cent since 2010. And those who have secured social housing are more likely to be overcrowded than they were a decade ago.

The numbers of families living in unsuitable private rented accommodation has shot up, as home ownership rates have collapsed. Many of them would be better off in social housing - and that is what hundreds of thousands of them say that they want.

Given that there are around 4 million subsidised rental homes, many of which will need to be replaced due to age, Malthouse's pathetic projected levels of new supply are essentially a prescription for the sector to wither.

Words are cheap. Creating more social housing isn't. Ministers will rightly be judged on what they actually deliver.

Be wary of attempts to rewrite the recent economic history books

"The past isn't dead. It isn't even past," wrote William Faulkner. That certainly applies to the economy.

The Office for National Statistics (ONS) said last week that it had been examining its estimate for telecoms output-price inflation between 2010 and 2015. Research suggests statisticians may have been considerably overestimating this in light of large increases in bandwidth volumes available to business customers over that period.

This tentative and pretty technical bit of work has been seized upon in some quarters as implying a huge rewriting of recent UK economic history.

The BlackRock fund manager and former special advisor to George Osborne, Rupert Harrison, concluded that: "A lot of what we thought we knew about the economy is probably wrong."

Following up, Harrison's ex-boss himself tweeted that: "Official statistics underestimated growth for 2010-2015 and overestimated inflation, and therefore real income growth was higher during that period. Good to hear, although would have been nice to know at the time…."

The Times in an editorial joined the revisionist party stating: "The result is likely to have been an understatement of GDP and an overstatement of inflation."

A cynic might argue that it would be convenient for Osborne and Harrison to push the idea that when they were in charge of the British economy, GDP and income growth was much healthier than currently shown in the official statistics.

But leaving aside the motivations, are the conclusions that are being drawn valid? And the answer is that there's something a bit previous about them, to put it mildly.

First some perspective. Telecoms account for less than 2 per cent of GDP. That's not negligible, but it's not big enough to fundamentally change the picture of the economy, even if the sector really did grow substantially faster in real terms over the period in question.

And, in any case, aggregate output figures are always "balanced" by the ONS to aggregate expenditure calculations of GDP. In simple terms, this means that even if telecoms output is judged to have been stronger, output in other sectors of the economy would automatically have to be revised down to compensate. That's why Richard Heys of the ONS himself has stressed this telecoms prices revision, if it were implemented into the national accounts, would be very unlikely to affect the overall GDP figures.

But what about consumer welfare? Doesn't this work also suggest more bandwidth for ordinary phone and broadband customers too, giving them more bang for each buck of their expenditure? Hasn't consumer price inflation therefore been exaggerated too, and real income growth correspondingly underestimated? Again, we shouldn't jump to conclusions. First, telephone services and equipment account for 2.5 per cent of the UK's representative consumption basket. Again, that's not really big enough to have the kind of dramatic impact on the overall inflation rate that some of the revisionists are implying.

Further, the ONS's new work applies only to business-to-business telecoms services, not customer purchases of mobile phone data. And there is already an adjustment for rising quality for things like mobile phone tariffs in the Consumer Price Index. This adjustment might turn out to be too small, but it's misleading to imply there currently isn't any allowance at all for the fact that customers could be getting more for their money due to technological advances.

The issue of how statisticians account for the rise of the fast-growing digital economy is certainly a very important one. And there may well be GDP revisions ahead, perhaps even consumer inflation revisions, which have hitherto been extremely rare. The picture of the economy in the past is actually changing all the time due to regular methodological revisions in a whole host of areas by the ONS. The past really isn't dead.

Yet at the same time it's spurious to make bold assertions based on thin evidence and perhaps wishful thinking about what the impact is going to be. There's also an irony about the former Conservative Treasury team claiming some vindication for their economic strategy on the basis of this latest research, given the core rationale for their controversial austerity programme was not rising household incomes, or even GDP growth, but rapid reductions in public borrowing and the overall government deficit.

Recall that in the 2010 "emergency" Budget, Osborne outlined bold plans to achieve a surplus on the structural current budget in 2014-15. In fact it was still 2.6 per cent of GDP in that year. And there is still no projected overall surplus in sight, despite the many promises of ministers. The theory that the economy has been doing much better than implied by the current official figures sits rather uncomfortably with the fact that tax revenues have been so disappointing relative to expectations eight years ago.

The past may not be dead when it comes to official economic statistics, but that doesn't mean we can casually rewrite history in a way that suits our interests and reputations.

INTERVIEW: Paul Krugman

As you would expect, Paul Krugman, the Nobel laureate economist and possibly America’s most influential liberal commentator, gets inundated with emails from the general public.

But one seems to have lodged in his mind. It came in August after Krugman had savaged Donald Trump for pardoning the notorious immigrant-brutalising Nevada sheriff, Joe Arpaio. In his regular New York Times column Krugman claimed that Trump’s pardon amounted to an endorsement of American-style fascism.

An email from a correspondent shot back: “It’s all very well for you to criticise Arpaio but how would you feel if New York was full of immigrants?”

Krugman, who won the Nobel Prize in Economics in 2008 for his work on trade, chuckles as he recalls the message, amused at this vision of the Big Apple as some kind of whites-only, immigrant-free, heartland town. Isn’t it supposed to be the coastal liberal elite who are out of touch?

Multicultural New York is Krugman’s home now. His academic berth is the City University of New York (CUNY), having moved from nearby Princeton in 2015.

He writes for The New York Times, although his superhuman blogging output has slowed down a bit in recent years. Krugman, 64, now spends more time with his 3.5 million Twitter followers. My news editor informs me the Independent’s web traffic notably spikes whenever he retweets one of our articles.

Krugman, who is married to the African-American economist Robin Wells, has made it clear he regards Trump as a white supremacist and an existential threat to the future of the American republic.

So when we meet on a grey September day in London’s docklands, at a conference looking back at the financial crisis 10 years on, organised by the Centre for Economic Policy Research, I’m interested to know how Krugman copes with what, by his own description, is a national emergency? Does it feel like he’s involved in a kind of war for the very survival of US democracy? Does he wake up and put a metaphorical tin helmet on?

“It doesn’t affect my daily life. I belong to a class of people who don’t get beaten up by the police,” he says, referring to the upsurge in protests against US police brutality and shootings.

“The closest I’ve got is that CUNY has a lot of students, including a fair number who were affected by the [Trump] Muslim ban – so I get all of that as part of the community, trying to defend these people’s rights.”

Speaking of university communities, one of the arguments deployed by the demagogues of US talk radio is that Trump’s rise represents a popular backlash against so-called campus illiberalism: the phenomenon of left-wing students at American education institutions, like CUNY, protesting against speaking invitations extended to right-wingers and demanding politically correct ‘safe spaces’.

Krugman doesn’t buy it. “On the one hand it’s stupid to play into right-wing caricatures of who you are. On the other hand the idea that that’s responsible for [Trump] is crazy,” he says. “The overwhelming example of identity politics in America is white Christian identity politics – that’s far more important.”

Krugman’s name is anathema in the land of the intellectual right, where he is regarded as unspeakably arrogant for his “shrill” denunciations of their economic error.

Yet arrogance isn’t the impression he conveys when we meet. In fact there’s a definite note of humility in his voice when I remind him of his predictions five years ago that Greece would leave the eurozone. Greece is still there. And now activity in the single currency is picking up.

“The political durability of the euro has been greater than I understood,” he admits. “Why is Greece still in the euro? It’s fundamentally because the Greek elite wants to be part of it – they fear being an outcast. They are willing to put up with almost anything to stay in. That’s been a surprise.”

Yet the trenchantly Keynesian author of End this Depression Now! has certainly not changed his mind over the damaging impact of austerity in the Western world over the past seven years.

And that goes for the UK, where Krugman was a major critic of the coalition government’s 2010 cuts. “In the end there was quite a lot less of it than the rhetoric would have suggested but it was certainly a bad thing,” he says. “UK performance over the [former Chancellor George] Osborne years is nothing to write home about. There is nothing that vindicates the policy.”

But humility returns when he discusses the puzzle of why, both in the US and the UK, average wages are not rising strongly despite the fact the unemployment rate in both countries has fallen to pre-crisis levels. Weak wages and inflation at a time of low unemployment is something that contradicts the fundamental model that has been used by macroeconomists for decades.

“Something has gone very wrong,” he concedes. “I’m not sure what the answer is. In effect everything we’ve done in macroeconomics since the 1970s is looking like it was wrong!” he says.

Krugman is fond of noting that “no one ever admits they’re wrong about anything”. Yet he’s not finding it too much of a struggle. In fact he seems remarkably relaxed about the possibility of error. But that might be because he’s just spent the past five days walking in the Cotswolds. “I’ve been before but not for a long time,” he says. “It was perfect!”

A brief holiday before flying back to the Big Apple to rejoin the battle to save American democracy.

This article appeared in The Independent on 19/10/17

TRANSCRIPT

A group of economists here are getting a lot of media coverage here for arguing – in contradiction of the rest of the economics profession – that Brexit can be beneficial for UK trade if we have unilateral import tariff reductions. Is that possible?

It’s essentially zero chance that it’ll be beneficial on the trade front. If Britain manages to get [World Trade Organisation] normal [trade]…it’s not going to do more liberal than that…that’s not going to be a major benefit.  It looks as if the kind of invisible benefits of being part of the EU, the lack of friction, seems to have had a significant impact on trade patterns. The general thing you find in Nafta [North American Free Trade Association] and even more the EU is, if you try to quantify the tariffs that are taken away, they shouldn’t be having a really big impact on trade but nonetheless you do see a significant increase in trade relative to other trading partners probably due to assurances, lack of friction whatever. You’re reversing that, so that’s a cost. That’s much more tangible than any pipe dreams about big gains elsewhere. It’s not a huge cost – maybe 2 per cent of GDP. But it is a cost. I don’t think there’s any plausible case that Brexit is a good thing for the British economy as a whole

Some economists maintain that greater trade leads to greater productivity growth? Do you believe in that?

A little bit. You get stuff cheaper….The best way to think about it is imports….Not being part of a customs union has some kind of cost, which appears to be an a real increase in costs of buying things abroad. This leads you to produce more things that you really shouldn’t be producing because you’re inefficient at it. And so we have pretty good estimate. We can look at how much trade will increase. What’s not clear is what kind of the implicit cost that corresponds to – what do you think is the elasticity of substitution? It’s productivity, it’s cheaper consumer goods, it’s specialising in the right stuff. All of which is going to be unwound by Brexit.

The currency markets marked down the pound after the Brexit vote. So you have no problem with that judgement on the UK’s future prospects?

First of all the currency markets have no better idea of the magnitude than any of us do but that seems about right. There’s a big wild card in all this which is financial services exports. What does all this do to the City of London? That’s going to make a big difference to just how big the adverse impacts are. I think we still don’t know that. A substantial depreciation of sterling…it’s true the EU has reduced access to the UK market as well but the EU market is a whole lot bigger. So a weaker pound is pretty much what you would expect – and appropriate. If you’re going to do this thing they you do want a weaker pound.

Our foreign secretary Boris Johnson has been rebuked by our statistics watchdog recently for making false claims about how much money we send to Europe. Is this a Trump-like thing? Is it an Anglo-Saxon thing?

From Trump, it’s lies top to bottom. And not just from Trump. It’s [been] lies top to bottom from the entire Republican Party on healthcare for eight years now. There is no centre any more. There is no acceptance of expert opinion on any issue. Britain? I wonder. You may be catching the contagion from us because of how often Britain tends to follow the US cultural lead.

Studies suggest the Rupert Murdoch-owned Fox News is having a major effect on what people believe in the US. The competition authorities here in the UK are examining the Murdoch bid for Sky. What’s your view on whether that should be allowed to go ahead?

Fox is a horrific distorter of public debate. But it’s also true that the rest of the media still, after all these years…it’s 16 years since I wrote that if [George W] Bush said the earth was flat the headlines would read ‘views differ on shape of planet”. It’s still true. If there’s an issue like Brexit – or almost anything else – the media work very hard to make it appear balanced even if it’s really unbalanced. I don’t know how to improve it aside from yelling at my colleagues but when the media do reach a consensus and treat something as an established fact it also often turns out to be just wrong. So all of the assertion that we were facing a [sovereign] debt crisis [in the US] was simply reported as a fact when there was not a hint of evidence in actually behaviour of markets, or anything else, that it was true.

Five years ago you were suggesting the eurozone could go under. Now the bloc said to have turned a corner and the fears for its survival were all overblown. Do you agree?

The political durability of the euro has been greater than I understood. Why is Greece still in the euro? It’s fundamentally because the Greek elite wants to be part of it – they fear being an outcast. They are willing to put up with almost anything to stay in. That’s been a surprise. Even people like me agreed that given sufficient time and sufficient pain internal devaluation will work. If you’re willing to accept many years of high unemployment wages will fall relative to others. Spain is the demonstration of that – the auto industry is booming. But to look at the rate of change now and ignore the enormous costs that were borne in the interim is missing the story. At the moment there’s sufficient recovery in southern Europe ex-Greece that the euro probably goes on now for an indefinite period. But that doesn’t mean it’s working well. In fact you see new stories about the costs of monetary union that draw fewer headlines. At the point after Greece probably the worst performer in the euro is Finland, which no one talks about because Finland is not unstable. But their two principal exports were paper and Nokia, both of which have been hard hit by technological changes and adjustment is a really nasty thing. So the euro still looks like a mistake but at the risk of sounding a bit like Alan Greenspan, regrettably it hasn’t gotten worse! Things are not bad enough to force a revision. In fact if anything [Jean-Claude] Juncker is back hailing the euro as the future of Europe even though the arguments against it are a strong as ever.

Would you take a similar view on UK austerity? Things have picked up but it could have been better…

In the end there was quite a lot less of it than the rhetoric would have suggested but it was certainly a bad thing. UK performance over the [George] Osborne years is nothing to write home about. There is nothing that vindicates the policy. In turns out that, yes, there is some resilience in all of our economies…

What’s your personal work life balance like? Has Donald Trump upset it?

Personally I’m making a real effort. I did reduce my teaching load by shifting [from Princeton to CUNY]…I think I’ve been mostly successful in adopting the attitude that this is going to be a long haul. The [US] Republic is at risk, but I’m feeling quite a lot better about it than I did at inauguration day. It appears there is more resilience- which doesn’t mean that we’re safe. I love the phrase that what we see in the Trump administration is “malevolence tempered by incompetence”. They haven’t consolidated power. We still have a lot of effective resistance. Part of the point is it’s not just Trump. We have a very sick GOP [US Republican Party] which has a lot of support. Any quick turnaround is unlikely. There’s not going to be a silver bullet. When Trump said I could shoot someone on Fifth Avenue, there’s something like that. Very possibly a number of senior people close to him will be indicted for treason, but 35 per cent of the public will probably stay with him regardless.

Have people come around to your view that the Republican Party is the central problem, that Trump isn’t an aberration?

I’m not sure. I think there is still a strong instinct among a lot of journalists that given the slightest excuse they want to go back to “both sidesism”. If you look at how Trump reached a deal over Federal government finance for a few month – and all of a sudden we have “oh Trump has pivoted – we now have bipartisanship”. Which was insane. They were shocked when stuff went south again. For the moment, with this craziness with Graham-Cassidy [the Republican attempt to repeal Obamacare] people are admitting that Republican moderates aren’t [moderate]. But I’m still seeing articles that refer to Bill Cassidy as a serious policy wonk. Oh my god, he’s even less of one than [Republican house speaker] Paul Ryan is. I personally, even if there’s a lot more support for the view that the GOP is mad, will always be considered unreliable because I was premature.

What’s it like being in America when you have a white supremacist sympathiser in the White House? How do you cope with that?

In some ways it helps to be in New York. I get some funny emails from people. They say: ‘It’s all very well you to criticise [the brutal Arizona sheriff that Trump pardoned] Joe Arpaio but how would you feel if New York was full of immigrants?”. You look around. I have an African-American wife and it turns out that anti-Semitism is one of those things that never goes away so it doesn’t affect my daily life. Not yet – who knows what it may do [in future].

Do you devote most of your mind to the economics side of Trump?

Probably not. I read all kinds of stuff. But what I meant by daily life is I belong to a class of people who don’t get beaten up by the police. It doesn’t affect anything I see. The closest I’ve got is CUNY has a lot of student including a fair number who were affected by the Muslim ban. So I get all of that as part of community, trying to defend these people’s rights.

What do you think of that idea that liberal campus intolerance is feeding the support for people like Trump, the identity politics argument?

On the one hand it’s stupid to play into right wing caricatures of who you are. On the other hand the idea that that’s responsible for [Trump] is crazy. The overwhelming example of identity politics in America is white Christian identity politics – that’s far more important. So yes I wish Antifa [the direct action anti-fascist group] and any of these people, I wish they’d shut up or go away, and there’s a little bit of co-dependency there. The very small violent left – they’re in their element and they’re making it worse for the centre left.

As a Nobel laureate there must be a temptation to be on a plane all the time, speak at events constantly. Is that something you actively resist?

Not well enough. New York Times rules are actually a protection. I can’t go and talk to Goldman Sachs. I can got to talk at a Ruritania finance association meeting – and those can eat up a lot of time. So I have to fight and I don’t always successfully hold that down. But yeah –[there are] temptations, pressure.

Presumably they pay a lot…

[It’s] trying to realise that I’m not short of money. I am short of time. So I blow off steam on cycling trips and time in the country. My primary residence is now in Manhattan and I have country house up in Massachusetts. I came to this conference by way of Beijing and Kiev. But I had few days – instead of packing another thing in – I actually just spent the last five days walking in the Cotswolds. I’ve been before but not for a long time. It was perfect….I said I didn’t want to go to London right away. I always think of London being grey and bleak. And yeah actually, it’s grey and bleak!

Labour’s costings, like the fiscal costings found in all party manifestos, are flaky. But there’s a solution

"Annual income twenty pounds, annual expenditure nineteen pounds nineteen and six, result happiness. Annual income twenty pounds, annual expenditure twenty pounds nought and six, result misery."

General elections tends to turn journalists and broadcasters into Dickens's Mr Micawber, albeit without the charm. Do the promises of the parties add up? Is there a gap? Is there to be happiness or misery? The questions ring in our ears.

In many ways it's a silly and unedifying spectacle. As the economist Chris Dillow has pointed out, it's a sham to imply that such "costings" exercises can tell us anything about the how the public finances will evolve under any particular government.

That depends far more on the state of the economy. And to the extent that the costings obsession of journalists at election time distract attention from bigger questions of macroeconomic management, it's harmful.

If growth is crushed because the government imposes excessive austerity while interest rates are still at rock bottom - something close to what we saw in 2010 under the Coalition - even the most honest of manifestos and most accurate of costings are not going to help the deficit.

In 2010 the Conservative manifesto pledged to eliminate "the bulk"of the current structural budget deficit by 2015. In fact it was still £45bn in that year, mainly because the economy performed so badly.

Yet at the same time, political parties should not be allowed to promise higher public spending or redistribution without acknowledging the costs and trade-offs. If that sounds like an anti-progressive conspiracy, consider how right-wingers are prone to making assertions about how cutting taxes will magically pay for themselves by turbo-charging growth. The fiscal credibility question cuts both ways. Or at least it ought to.

Labour's tax costings today are a mixed bag. The income tax (£6.4bn) and corporation tax (£19.4bn) raising figures by 2021-22 look broadly reasonable because they are based on a HMRC "ready reckoner" document, which allows anyone to estimate what changing headline tax rates would mean for revenues.

But the assertion that Labour would bring in £6.4bn by clamping down on tax avoidance is simply a madeup number, in the sense that it's an aspiration, rather than being based on any kind of programme that can be evaluated. We saw precisely the same made-up numbers in the 2015 manifestos from both Labour and the Conservatives.

Falling between those two extremes are Labour's estimates that an "excessive pay levy" would raise £1.3bn or that introducing a new financial transactions tax would bring in £5.6bn, to take just two examples. This is speculative because we cannot say with any confidence how the public's behaviour would change in response to the introduction of such new taxes because we have no history to go on.

Would firms simply soak up the new pay levy in the form of lower profits and carry on rewarding top staff in the same way? Or would they curb salaries, meaning the levy raised negligible amounts for the taxpayer? The same applies to the proposed transaction tax. Perhaps asset managers and financiers would trade less in response to the levy, meaning it doesn't produce much money. Incidentally, given Labour regards both excessive pay and excessive financially trading as undesirable, it logically ought to welcome a strong behavioural response - although that would create a problem for its costings.

It's true, of course, that new taxes are introduced by governments all the time. And governments, when they do this, always make an estimate of how much money it will end up raising, taking into account behavioural change. Yet there's a check on over-optimism now in the shape of the Office for Budget Responsibility. The OBR tells the Treasury and HMRC to think again if it isn't convinced by their estimates. And it highlights the uncertainty of particular costings.

The obvious and sensible solution to the issue of election manifesto costings is to allow the OBR to perform the exercise - applying the same uncertainty scale on individual tax proposals as it does at Budgets.

This isn't a particularly radical suggestion. The OBR's equivalent in the Netherlands already costs the manifestos of parties that submit their proposals to it in good time. And the head of the OBR, Robert Chote, has said his organisation is willing to do the job, provided its resources are significantly expanded.

The former Chancellor George Osborne deserves credit for establishing the OBR in 2010. The watchdog has helped restore credibility and transparency to Budgets. But Osborne turned down a proposal from Labour in 2014 to allow the OBR to cost all the party manifestos.

Whoever forms the next government would be wise to revisit this. The results for the voting public might not be Micawberite ecstasy, but we would certainly be better informed about the choices available to us than we are now.'

What do banks and financiers get in return for paying George Osborne £50,000 for one hour of work?

George Osborne presided over a national productivity disaster when he was Chancellor. But the MP for Tatton is certainly making an outstanding personal contribution to repairing some of the damage now.

Last week the House of Commons Register of Members' Financial Interests disclosed Osborne's earnings from outside Parliament since he was sacked from the Cabinet last year. What the record shows is nothing less than a productivity miracle. In October Osborne spent two hours delivering a speech to an outfit called Palmex Derivatives in the City of London for which he received £80,240. That's more than £40,000 per hour of his time. Not even Paul Pogba of Manchester United gets that kind of hourly rate.

Earlier in the same month Osborne gave a speech to the Securities Industry and Financial Markets Association in New York for just one and a half hours. He expects to receive £69,992 for his efforts; an hourly rate of £46,000.

Osborne's full salary when he was a Chancellor was around £120,000 a year. Assuming that he worked 10 hour days and took five weeks holiday a year his pay rate was around £50 an hour. So since leaving office Osborne has multiplied his personal output per hour by more than 900 times. If only the rest of the economy could bottle some of that productivity-enhancing magic. Maybe we should all get sacked from the Cabinet by Theresa May.

But speeches to financial firms are not Osborne's bread and butter. That will come from four days a month "advising" the colossal US asset manager Blackrock, a job for which he will be paid around £650,000 a year (not including share-based bonuses). Assuming, again, a 10-hour working day, that's £1,350 an hour, still at least 25 times his previous daily rate as a minister.

When he was shadow Chancellor George Osborne talked tough on the need to reform finance, sensing the mood of outrage in the country in the wake of the collapse of Lehman Brothers and the associated economic carnage. In 2009 he made radical noises about breaking up "too big to fail" banks including Lloyds and the Royal Bank of Scotland, which had been bailed out by the taxpayer at huge public expense.

But that radicalism melted away when he entered 11 Downing Street. He did establish the Independent Commission on Banking headed by Sir John Vickers to look into the case for breaking up the giant banks.

But in his 2011 report, Vickers failed to recommend a split and instead delivered a halfway house known as "ring-fencing". The banks still gripe about that hassle of that reform, but this a pedicure compared to the amputation a full split would have represented.

And as the years went by Osborne talked less and less about financial reform and more about the need to unclip the wings of the banks. Avoiding "the stability of the graveyard" became his catchphrase. The Treasury's door was constantly open to the industry's lobbyists and top executives. In one remarkable episode, he personally intervened to stop the US Department of Justice bringing criminal charges against HSBC for laundering the profits of terrorists and drug dealers. One of Osborne's lucrative speeches in January was to HSBC: £51,328 for two hours of work.

As Chancellor he pushed through regulatory changes with major implications for the savings and pension industry - most of them positive for the bottom lines of those companies. And now Osborne works for the largest asset manager in the world, which plans to pay him almost 10 times his MP's salary while he continues to sit in the House of Commons.

We have no reason to believe that Osborne was motivated, while he was in high office, by the possibility of one day earning hundreds of thousands of pounds a year from the financial sector; nor that he took any decision as Chancellor in relation to the industry with anything except the good of the British public uppermost in his mind.

Nevertheless what message does the example of him now being sprayed with cash by giant banks, financial trading companies, asset managers and hedge funds, all within months after leaving office, send? What's the message that goes out to other politicians ascending the greasy pole? It sends the message that it would be wise to be attentive towards the interests of the financial industry because, if your political career is terminated prematurely, these companies can - and do - reward former top politicians in ways that would make a Premier League footballer blush.