Friday, 1 April 2011

Where's the fool?

To mark April Fool’s day, the UK media have a charming habit of publishing plausible yet false stories to entertain their readers. The Guardian, splendidly, once published a guide to the island of Sans Serriffe. However, to my critical eye it’s not just April 1st when it seems difficult to distinguish between fact and fiction. And it’s not just the silly stuff.

Take The Guardian’s recent story on whether the UK can pay its debts - “UK risks losing top AAA credit rating if growth is lower than predicted”. The maintenance of the country’s AAA credit rating is a key economic objective of the present government, and so the story is of significance.

The newspaper’s headline is reflected in the opening of the story, and there is a quote high up the story from Moody’s in support of the opening section of the story (the ‘lede’).

However, the headline of the report was actually: “UK Budget: Continued Commitment to Fiscal Consolidation Critical to Aaa Rating”. ‘Fiscal consolidation’ broadly means cutting deficits - where the government spends more than it receives in tax.

Here’s some meat from the Moody’s report: “The two key drivers of the future evolution of the United Kingdom's credit risk profile are likely to be economic growth and fiscal consolidation. Although the government faces challenges in both areas, the budget announcement on 23 March 2011 indicates that the UK has the willingness to meet these challenges. This conclusion is based on the government's plans to achieve a cyclically adjusted current balance by the 2015-2016 fiscal year, or even earlier, despite the recent deterioration in the near-term economic growth outlook.” (Emphasis added.)

However, this doesn’t fit the centre-left / Guardian narrative about the economy, which is that government’s cutting plans are excessive and will mean the UK economy will stop growing. So, the story effectively hides the fact that Moody’s explicitly praised Osborne’s budget, and specifically his plan to cut the deficit in full by 2015-16, by burying it in paragraph eight (of 10). To get to the truth, readers must first wade through references to Osborne’s over-optimistic growth forecasts, the threat this causes to the Aaa rating and the (spurious) assertion that the Moody’s report directly led to a (tiny) drop in the value of the pound.

Ultimately, the story is misleading, because even the most determined and well-informed reader would have struggled to realise that Moody’s believes it “critical” that the government focuses on cutting the deficit, while the issue of growth is important but of secondary significance.

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