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Economists right after the event

posted 24 Jan 2014, 08:48 by Peter Webb

On January 23rd the well known economist Andrew Lilico gave a viewpoint in the Daily Telegraph headlined “Economists are nearly always right about things, despite what you may think”. It concluded: “The insights orthodox economics will eventually produce in reaction to the financial crisis will advance our social and economic life and prosperity even further than economics have done already. For good economists, given time and sound theory, are almost right about almost everything.”  Note eventually and given time !. There is nothing like being right about things, especially the onset of the financial crisis, long after the event ! Do they drive their cars looking constantly in the rearview mirror ? Accountants on the other hand keep their eyes on the road and want  dashboard instruments that work in real time. The public finances fiasco is testament to the difference. 

I have it personally from the Institute of Chartered Accountants that We would certainly agree with you that there is scope for significant improvement in how public sector finances are managed and how governments are held accountable for their stewardship of public money. The UK is still spending beyond its means and national debt is set to reach 80% of GDP before the government gets rid of the deficit in 2018-9.

 Our proposals for a CFO at the Cabinet Table have influenced the Government’s Financial Management Review published in December. Sadly, we think this review has missed the mark on how a CFO in Government can help strengthen public finances. In particular, (my highlighting)what the Government is proposing seems only to cover one aspect of financial management, the public spending side. To be most effective it should cover overall balance sheet management integrated with performance management - both inputs and outputs of the financial equation. 

 Government is led by politicians who allow themselves to be reliant on economists who form the ‘majority party’ in  the Treasury. Statistics are what they do. Now read my attempt to get the Comptroller and Auditor General to address this.

Peter Webb,
24 Jan 2014, 08:48