I was puzzled to learn that I had been quoted on Newsnight by Kenneth Clarke as warning that a hung parliament would be disaster for the economy – puzzled because I thought I had written something rather different.
On checking, that was indeed the case. I had warned that there was a popular perception that this might be bad news for the economy but that actually things might turn out rather differently. A weak government might decide to call in the International Monetary Fund to get it to endorse its policies and financial market confidence might accordingly be higher as a result. There was a concern about a minority government not lasting very long, in which case people would postpone investment decisions, but that was a separate issue.
On return I thought I had better look at the history. Minority or coalition governments may not last long but the most severe fiscal cutbacks of the past century have been under them. Lombard Street Research has just done a paper pointing out that these were under the coalitions led by David Lloyd George in 1921 and Ramsay MacDonald in 1931, and under the Lib-Lab pact in 1977.
Mind you, all those governments fell shortly afterwards, so maybe the precedent is not so encouraging after all, at least for the politicians concerned.