As entrepreneurs wait to see what the budget will mean to them, the recovery will falter – if the private sector is to compensate for public spending cuts, stable rules of the game become more imperative. Government doesn’t need to be strong, but predictable.
During the UK general election there was a lot of talk about "uncertainty". A point I felt was neglected was that in politics there's (at least) two forms of uncertainty - that stemming from not knowing who's in charge, and that stemming from not knowing what those who are in charge will do. Whilst strong government reduces the former, it increases the latter.
Although I feel that the UK public finances are in dire need of some radical reforms, it's important not to be a sycophant for change - whilst I think decisive action needs to be taken, I think it's important to consider the issue of regime uncertainty that is created by all governments, regardless of hue. To some extent this should be the only radical budget delivered by George Osborne. He should establish the rules of the game, and then avoid tinkering.
I've made this point in my recent Reuters op-ed, quotes above. Read it here.
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