Opinion

Hugo Dixon

New UK coalition deserves 7 out of 10

Hugo Dixon
May 13, 2010 08:50 UTC

– Hugo Dixon is a Reuters Breakingviews columnist. The opinions expressed are his own –

The new UK coalition deserves 7 out of 10. The pact between the Conservative and Liberal Democrat parties, led by David Cameron as the new prime minister, seems determined to address the country’s most important problem — the deficit. This is vital given that the euro zone debt crisis could still prove contagious. It should also be positive for sterling.

Some good ideas are also emerging on tax and spending. But other plans for tax and banks look odd — and there are doubts about whether these bedfellows will be able to work together. After all, Britain has not had a coalition government since World War Two.

Some will be disappointed that George Osborne, who has not been impressive as the Tories’ finance spokesman, will be Chancellor of the Exchequer. But the overall policy stance looks promising. The new government clearly sees dealing with the mess in the public finances as its top priority. The LibDems, led by Nick Clegg, have signed up to Cameron’s plan to find 6 billion pounds in efficiency savings in the current financial year.

This is, of course, only a pin prick given that the deficit is expected to top 160 billion pounds, or 11 percent of GDP. But it is reinforced by several other measures: an as-yet vague promise to significantly accelerate action on borrowing; an emergency budget within 50 days; and plans to involve both the Bank of England and a new Office of Budget Responsibility in vetting budget plans. Asking a bunch of technocrats for advice could give the new government the necessary alibi to implement more savage cuts than the Tories indicated during the election campaign.

Gordon Brown: flawed saviour of financial system

Hugo Dixon
May 12, 2010 07:31 UTC

– Hugo Dixon is a Reuters Breakingviews columnist. The opinions expressed are his own –

Gordon Brown may go down in history as the flawed saviour of the global financial system. Brown had many faults including overseeing a public spending splurge in his decade as the nation’s finance minister. But he did make one big contribution. He galvanised other leaders to save the bank system during the post-Lehman <LEHMQ.PK> meltdown.

Brown, along with Tony Blair, was the main architect of New Labour — an initiative that dragged the former socialist party away from the fringes and towards the centre-left of the political spectrum. After New Labour took power in 1997, Brown devoted himself to the economy. His main achievement as finance minister was to give independence to the Bank of England. That depoliticised monetary policy.

Breaking up banks is no silver bullet

Hugo Dixon
May 4, 2010 07:32 UTC

– Hugo Dixon is a Reuters Breakingviews columnist. The opinions expressed are his own –

Breaking up the banks is no silver bullet. Politicians on both sides of the Atlantic — including two of the party leaders fighting the UK election — want to separate so-called casino investment banks from utility lenders. But such simple rules would create arbitrage opportunities and rigidities without curbing excess risk-taking.

In the last of the UK’s election debates, the Liberal Democrat and Conservative leaders vied with one another to see who could be tougher on banks. As a soundbite, the notion that nasty, risky investment banking should be split from nice, safe retail banking may well be a winner. Gordon Brown, the Labour leader who has a more nuanced position, was left looking like a defender of big banks.