An economics lesson for David Cameron

Comparing the UK's finances to a maxed-out credit card betrays a poor understanding of basic account

Ed Balls seems to be on track, as he is clearly rattling the coalition's cage. He made an interesting speech today at the London School of Economics, where he called for a temporary reduction in VAT, which would help to boost spending. This seemed especially apposite on a day when the Office for National Statistics published retail sales numbers that were horrid. A VAT tax cut would have the added benefit that it would immediately lower the CPI, which jumped artificially in January when Slasher raised it.

David Cameron's response to the Balls speech today apparently suggested that he is against tax cuts as a way to boost the economy. Amazing. A Treasury spokesman even suggested that tax cuts would lead to bankruptcy. "Tax cuts" has traditionally been a right-wing mantra, so that was something of a surprise -- and unlikely to go down that well with his backbench MPs.

I am afraid it really is time that Cameron took some lessons in economics before he talks the British economy into the ground. He has been the most unpatriotic Prime Minister we have ever had, with his entirely false claims that the economy was bankrupt when it quite clearly was not (and never has been). He has done this for cheap political gain and it has contributed to a collapse in consumer confidence. He should be ashamed of himself -- his job is to boost confidence, not to destroy it.

But most astonishing of all is Cameron's repetition of Nick Clegg's idiotic claims that the UK had maxed out its credit card.

If you have maxed out your credit card, if you put off dealing with the problem, the problem gets worse.

Asinine nonsense. Cameron shows no understanding of basic accounting. I guess that isn't surprising for someone who has never run a business and had to file basic accounts. Folks with silver spoons don't need to do that. Let me explain. There is an asset side to the balance sheet and a liability side. The national debt is not analogous in any way to a credit card. The debt has been used to pay for the infrastructure, roads, schools, ports, the Houses of Parliament and even Downing Street.

A little example makes clear that Cameron knows not what he is talking about. Suppose an individual receives a bequest from a long-lost uncle and is told it consists of a house with a mortgage on it of £200,000 and the house itself is worth £20m. Cameron would no doubt claim that it would be outrageous for the nephew to accept the gift because he would have to take on a mortgage of £200,000 on it. But that is absurd and the nephew is delighted at his good fortune and happily accepts the gift. The right question for the nephew would be: "How much is the asset (the house) worth, compared to the size of the liability (the mortgage)?"

The next generation will receive not only the debt but also the assets. The nephew and the Prime Minister need to compare the scale of the assets to any liabilities. Only a fool would focus solely on the liabilities.

Cameron is an economic simpleton. Yet everyone from Cameron's aunt to the family's pet fish, Eric, and the Conservative deputy, Michael Fallon, agree with Dave's credit-card anology. Sensible people cringe.

David Blanchflower is economics editor of the New Statesman and professor of economics at Dartmouth College, New Hampshire

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Commons Confidential: Dave's picnic with Dacre

Revenge is a dish best served cold from a wicker hamper.

Sulking David Cameron can’t forgive the Daily Mail editor, Paul Dacre, for his role in his downfall. The unrelenting hostility of the self-appointed voice of Middle England to the Remain cause felt pivotal to the defeat. So, what a glorious coincidence it was that they found themselves picnicking a couple of motors apart before England beat Scotland at Twickenham. My snout recalled Cameron studiously peering in the opposite direction. On Dacre’s face was the smile of an assassin. Revenge is a dish best served cold from a wicker hamper.

The good news is that since Jeremy Corbyn let Theresa May off the Budget hook at Prime Minister’s Questions, most of his MPs no longer hate him. The bad news is that many now openly express their pity. It is whispered that Corbyn’s office made it clear that he didn’t wish to sit next to Tony Blair at the unveiling of the Iraq and Afghanistan war memorial in London. His desire for distance was probably reciprocated, as Comrade Corbyn wanted Brigadier Blair to be charged with war crimes. Fighting old battles is easier than beating the Tories.

Brexit is a ticket to travel. The Independent Parliamentary Standards Authority is lifting its three-trip cap on funded journeys to Europe for MPs. The idea of paying for as many cross-Channel visits as a politician can enjoy reminds me of Denis MacShane. Under the old limits, he ended up in the clink for fiddling accounts to fund his Continental missionary work. If the new rule was applied retrospectively, perhaps the former Labour minister should be entitled to get his seat back and compensation?

The word in Ukip is that Paul Nuttall, OBE VC KG – the ridiculed former Premier League professional footballer and England 1966 World Cup winner – has cold feet after his Stoke mauling about standing in a by-election in Leigh (assuming that Andy Burnham is elected mayor of Greater Manchester in May). The electorate already knows his Walter Mitty act too well.

A senior Labour MP, who demanded anonymity, revealed that she had received a letter after Leicester’s Keith Vaz paid men to entertain him. Vaz had posed as Jim the washing machine man. Why, asked the complainant, wasn’t this second job listed in the register of members’ interests? She’s avoiding writing a reply.

Years ago, this column unearthed and ridiculed the early journalism of George Osborne, who must be the least qualified newspaper editor in history. The cabinet lackey Ben “Selwyn” Gummer’s feeble intervention in the Osborne debate has put him on our radar. We are now watching him and will be reporting back. My snouts are already unearthing interesting information.

Kevin Maguire is the associate editor (politics) of the Daily Mirror

Kevin Maguire is Associate Editor (Politics) on the Daily Mirror and author of our Commons Confidential column on the high politics and low life in Westminster. An award-winning journalist, he is in frequent demand on television and radio and co-authored a book on great parliamentary scandals. He was formerly Chief Reporter on the Guardian and Labour Correspondent on the Daily Telegraph.

This article first appeared in the 23 March 2017 issue of the New Statesman, Trump's permanent revolution