“The talk of doom” - that’s how they refer to this lecture at the Institute for Fiscal Studies. A wide range of UCL Economists – from current students to seasoned alumni – gathered to listen to Carl Emmerson of the IFS speak at the UCL Economics Alumni Event, “Disease and cure in the UK: The fiscal impact of the crisis and the policy response”.
The question that immediately came to mind was whether Mr Emmerson referred to it as the “talk of doom” because of the perilous state of the UK’s public finances, or because the audience was full of UCL Economists!
The talk itself was very thorough. The diagnosis: that the UK’s 2009-10 government deficit reached the highest share of GDP since the Second World War.
An important question was raised over how much of that deficit is impervious to economic growth – the structural deficit – which is the part of the deficit that can only be dealt with through tax rises or spending cuts. While it was made clear that the structural aspect of the deficit is not straight forward to estimate, it was quite apparent that the vast majority of the deficit is structural.
Which brought us to the cure: the structural deficit needs to be cut, in order to ensure that UK public finances do not spiral out of control. The cure, however, is a lot more controversial than the diagnosis, as anyone who has been following British politics recently will be all too well aware.
While the current government has decided to undertake the second largest programme of cuts of any industrialised country, the opposition argues that such action will destabilise the recovery. The discussion focussed on the impact of the March 2011 Coalition Budget on government finances, as opposed to what the impact would have been under Labour’s March 2010 budget, which advocated a slower rate of cuts.
After the event, Economics alumni enjoyed a networking reception in UCL’s recently renovated Print Room Café. While current students sought valuable advice from former students, the alumni were able to exchange memories of their time at UCL.
As one would expect, there was a very detailed, reliable and impartial analysis of the current fiscal state of the UK from the IFS. Whether or not the Conservative-led coalition is cutting “too far, too fast”, remains open to debate. One thing that the IFS made clear, however, is that doing nothing is not an option.
By Tom Palmer (3rd Year Bsc Economics Student)
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