Belfast Telegraph

Messages can be confusing

By Brendan Keenan

Those clever communication consultants who, for a handsome fee, will train one how to do TV and radio interviews, say that one should pick only one point to get across to the audience.

Well, perhaps two at the most. Otherwise, the message gets confused. So the complications are evident when one is dealing with several arguments, some of which appear to contradict each other.

The Fiscal Advisory Council ran slap into this problem last week, with its second report on budgetary matters, and ended up being misunderstood. Something as grand as the FAC cannot boil things down to one or two points, but things become really difficult if the points appear to clash.

The two I have in mind are important. The first is how stringent should be the effort to restore balance to the public finances? This effort is known as "austerity", which is fair enough if one is talking about the effects, and it is a handy word to use. It is quite different to describe austerity as a policy; as if reducing incomes and living standards was the object of the exercise. This confusion between purpose and effect leads to a popular current phrase - "you cannot tax your way out of recession".

That is almost certainly true, although there are those who say one can cut one's way out of recession. In any event, even if it is accepted that cutting deficits does not of itself cure recession, it does not automatically follow that not cutting them will do so.

The FAC is among those who say it will not. At the risk of over-simplifying things (almost inevitable with FAC reports) its view can be expressed as saying that the country cannot begin to get out of recession until borrowing has been brought down to sustainable levels.

If that is correct, then the best thing is to do it as quickly as possible. That means more austerity, but recovery can come sooner. It is perfectly possible to disagree with this, but it is not fair to portray it as a belief that austerity is a cure for recession.

It may also be unfair to say the 28 economists who signed an article in another newspaper last week were arguing you can borrow your way out of recession - although it read a bit like it at times.

People cannot be expected to lift their heads above the parapet until they think this reduction in incomes has come to an end. That is the argument for speeding up the process, as advocated by the fiscal council.

The second important point made by the FAC - and the one which, at first glance appeared to contradict the first - is that, while the austerity programme should be tougher, it should also be more flexible than it is.

The current programme is not particularly ambitious. It will just get the country over the line in 2015 and that is on the basis of healthy economic growth from next year on.

Despite a hoped-for €11bn rise in the value of goods and services by 2014, the planned deficit will still be 5% of GDP. It takes no imagination to see the crisis which looms if that growth does not materialise.

If it does, FAC thinks the 2015 target of a 2.9% deficit is pretty unimpressive, especially since it implies further correction in the following years. That will hardly persuade people that they have emerged on the other side.

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