On the eve of the UK budget statement, the International Monetary Fund today estimated the cost to the British government and taxpayer of bailing out British banks to be £200 billion. That’s not how much we’re under-writing, guaranteeing or spinning. It’s money that we will have to actually pay out. Except, no it’s not. There’s no point giving you the link to the IMF web-site so you can see the fancy graph because they’ve, er, well, anyway it’s not there anymore. They took it down. It was wrong. Oops.
The economic commentariat, opposition politicians and ordinary people were all ready to rage about this figure – a bill that amounts to around 13 per cent of British annual economic output, and is over 3 times greater than the £60 billion figure being noised around by official UK sources, and coming from the impeccably authoritative IMF. And then they retracted.
For those of us who have a memory, that’s right, this is the same IMF that got a huge big slab of money along with an even more influential role in the global economy at the recent G-20 summit in London. The thoughts of Gordon Brown – the printable part – are presumably along the lines of: They come to London, we let them into the big meeting, give them $750 billion and this is how they pay us back?
On second thoughts though, maybe the IMF has done Brown, Labour, and perhaps all governments a great big favour.
After all, the figures for the UK budget deficit announced by Chancellor of the Exchequer Alistair Darling last November – £78 billion for the year 2008-9 and £118 billion for 2009-10 – are now known to be well wide of the mark. The expectation is that he will announce a deficit of £160 billion for the current financial year.
So what does the Chancellor have to say about that? What he will most likely do is argue more or less that circumstances have unfolded and in various countries and regions the crisis has deepened, while unexpected downturns have interacted with previously undisclosed debts due to shortfalls in monitoring and regulation that have now been corrected, so the Treasury has recalibrated its projection based on the latest data and, well, things are worse.
But after today’s bad miss by the IMF, he could wave his hand in their general direction and try saying, Look, anyone can make a mistake.
It could work. The government was actively involved in the takeover of the floundering HBOS bank by Lloyds TSB. This appears to have lumbered a successful bank with all the debt, much of it hidden from sight, of a badly run, over-reaching bank. The weight of HBOS’s debts, some banking analysts have argued, could hamper Lloyds TSB for years to come. What does the government have to say about that? Oops, sorry, didn’t quite see that one coming.
The German government made money available so Germans can trade in their old cars and get subsidised new ones and said that was all the stimulus it would give the car industry. Then changed its mind and banged some more hundreds of millions of Euros into supporting the car industry. Inconsistent? Inadequate forecasting? Sorry, man, honest mistake. But, hey, smart wheels.
Italian Prime Minister Siolvio Berlusconi announces an €80 billion package of measures to stimulate the economy in November 2008, most of which turns out to be previously announced grants from the EU, and then waves off accountability for promises made during the 2008 election campaign to reform public expenditure, cut taxes and cut spending. Yeah, whatever.
But no argument about who could most use this form of high-flown discourse, who takes pride of place: Gordon Brown, of course, who in his last budget presentation two years ago, before he became Prime Minister, said that ten years of economic stewardship by the Labour government had abolished the previous pattern of “boom and bust”. Notoriously, Brown finds it very hard to get lips and tongue to cooperate in using the “sorry” word. With his Scottish manse upbringing, however, he presumably knows all about “To err is human.”
Given all the genuine uncertainty about our short-term economic future, the omniscience that we routinely demand of our governments is really quite overblown for these times. Acknowledging human fallibility is not too bad an idea. Perhaps the IMF’s screw-up over the cost of the British bank bail-out was just a typo. But it’s worth thinking about for a moment, that perhaps if economists learned to acknowledge error and then occasionally even to apologise for their undoubtedly honest mistakes, perhaps we might all be marginally better off. Economics is an important form of knowledge but it is not an exact science and it grates when people – economists and non-economists alike – speak and act as if offers greater certainty and precision than it can really manage. So I wouldn’t mind at all if economists learned this new piece of jargon – oops.
Though only on condition that politicians aren’t allowed to take economists’ fallibility as an alibi for their own cock-eyed politicking, currying favour with middle-class voters and addiction to spin.