A party in office for fourteen at the likely time of the general election will find it hard to escape being held responsible for all that’s gone wrong. This can result in a vicious circle of unpopularity leading to division leading to greater unpopularity.
We now have created a situation where the OBR is effectively setting the immediate stance of fiscal policy. If economic expectations are poor, the finances look poor, so austerity or tax hikes follow – but these in turn make the economy and finances worse.
it is almost impossible to disentangle any effect from the much larger shock resulting from pandemic and war.
It should take advantage of the current macro-economic environment afforded by low borrowing costs, to provide stable – and sizeable – funding.
The moral of this story is that these models provide interesting context – a little like horoscopes. But when it comes to decision-making, give me an economic historian in preference to a model any day.