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So, Geoffrey Howe's 1981 Budget has gone down in history as a much-vaunted example of resolute fiscal conservatism in the face of multiple demands for Keynesian profligacy.  You may recall when all those economists' letters were flying around just before the 2010 election that regular comparison was made with the letter signed by 364 economists after the 1981 Budget demanding Howe abandon his plan to radically tighten fiscal policy in pursuit of lower inflation. 

So, Geoffrey Howe's 1981 Budget has gone down in history as a much-vaunted example of resolute fiscal conservatism in the face of multiple demands for Keynesian profligacy.  You may recall when all those economists' letters were flying around just before the 2010 election that regular comparison was made with the letter signed by 364 economists after the 1981 Budget demanding Howe abandon his plan to radically tighten fiscal policy in pursuit of lower inflation. 

Imagine my surprise then on reading the text of that famous Budget to come across this passage:

For the year now approaching, 1981–82, our published strategy suggested an illustrative PSBR of some 3 per cent. of the gross domestic product. Translated into today's prices that would be about £7½ billion. In 1981–82 output is expected to be lower, and unemployment higher, than envisaged a year ago. The effect of the recession on the PSBR is likely to be even greater this year. It is therefore clear that a £7½ billion PSBR for next year would be unduly restrictive ... Taking everything into account, I have concluded that it would be right to provide for a PSBR in 1981–82 of some £10½ billion, which is a little more than 4 per cent. of the gross domestic product. This is still a high figure, but I believe it to be consistent with the monetary target that I have just announced. I also believe it to be a sum that can be financed without placing undue strains upon the capital markets.

Howe actually departed from his plan to cut government borrowing to £7.5 billion in 1981/2 because the economy was weaker than expected and opted instead for a less stretching target of £10.5 billion.  Sounds a bit like a Plan B to me.

In his Mais Lecture, Osborne claimed to be following in the footsteps of the Tory Chancellors of the 1980s. I wonder if he really will follow Howe.

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