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FT Letter: An economist, outside the tent, looking in

Oct 21, 2022

This letter was first published in the Financial Times – 21st October 2022.

I would like to clarify some misunderstanding of my role as an outside economist (“Jeremy Hunt reinforces return to ‘orthodoxy’ with Economic Advisory Council”, Report, October 19).

As an outside economist, my views are often sought by a variety of politicians. Before she became prime minister I met Liz Truss twice at Chevening, and on one of these occasions with her chief economic adviser, Matt Sinclair, and Kwasi Kwarteng, plus other outside economists. I did not see Truss or Kwarteng again, or any Treasury minister, once the new government was formed. The idea I am, or was, inside the tent as an adviser is simply not true.

The piece cites a Treasury official correctly noting my lack of involvement. However, implicit in the piece, and the briefing behind it, is the idea that outside economists were behind or instrumental in the “mini” Budget. This simply isn’t the case.

Ahead of the “mini” Budget, in my columns and public appearances, I repeatedly highlighted the febrile state of the markets; the need for fiscal discipline; to show that fiscal policy was affordable and not inflationary; to stress that tax cuts alone do not generate growth; to outline fiscal principles and allay fears about institutional independence. These are on the record for all to see.

These were also points I stressed in the aforementioned meetings and subsequently in one correspondence. I even explicitly made clear that if immediate policy announcements were handled badly then a market crash was possible.

The decision to announce measures that were not trailed in the campaign and therefore not priced in by the markets, the decision to sideline the Office for Budget Responsibility and the decision, among others, to double down on unfunded tax cuts despite the clear market reaction, lay squarely within policy circles.

Whether my views were heeded is another matter but, for the record, there was a credible argument for some fiscal loosening going into a global downturn to address downside risks.

After the “mini” Budget, I was a strong supporter of the growth plan and an open critic of the cut in the top rate of tax, among other measures. Importantly, there is a significant difference between supporting broad aspects of the “mini” Budget and its vision, as I did, and the fiscal statement in its entirety and its subsequent handling.