The tragedy of UK fiscal policy in the aftermath of the financial crisis

The evolving response of the UK fiscal authorities to the financial crisis and recession are briefly outlined with a focus on the fiscal austerity programme introduced by the incoming Coalition government during 2010. The reasoning for that programme is critically examined and largely dismissed. It is argued that the drive for major cuts in public expenditure comes from seeking to achieve a balanced structural budget and reductions in estimated potential output. The significance of the latter are discussed. The paper is completed by a brief consideration of alternatives. Copyright The Author 2012. Published by Oxford University Press on behalf of the Cambridge Political Economy Society. All rights reserved., Oxford University Press.