The Tories’ media echo chamber, part 85

Defending your economic plans means you have to try to discredit your opponents.

Last week, the Guardian's well-informed and well-connected economics editor, Larry Elliott, revealed leaked Treasury data suggesting George Osborne's emergency Budget would cost up to 1.3 million jobs, across the public and private sectors.

In a column earlier this week, Elliott added a new twist to his scoop:

The Treasury, to put it mildly, was not best pleased by this story and vowed to "trash" it when it broke in the Guardian last Tuesday, on the eve of David Cameron's appearance at Prime Minister's Questions.

Trashing stories that you don't like or agree with? So much for the so-called new politics, offered up by Messrs Cameron, Clegg, Osborne and Cable.

But the echo chamber got the message. The former Tory PPC Iain Dale, a man renowned for his grasp of macroeconomics, claimed on his blog, on the night the story broke, that Elliott "can't count" and called him a "joke" and a "prat". The Wall Street Journal's Iain Martin emerged from his "sickbed" to endorse the Treasury's fanciful figures on private-sector job creation.

The libertarian blogger Paul Staines joined the fray, also citing convenient figures from the "independent" Office for Budget Responsibility. And Peter Hoskin, on the Spec's Coffee House blog, remarked that "this story may not be as awful as it first appears". In a sense, he was right -- as the FT points out today, it's much worse.

The Tories' programme of draconian spending cuts is in disarray and the credibility of the OBR's growth and employment forecasts has been questioned. Meanwhile, business confidence is collapsing. And international institutions such as the IMF and the OECD, having initially welcomed the coalition's plans for fiscal retrenchment, now seem to be having their doubts. The IMF this week called the government's spending cuts into question, warning that "most advanced economies do not need to tighten before 2011, because tightening sooner could undermine the fledgling recovery". And the OECD expressed concerns over the prospects for UK job creation and how "the new Budget ends funding for two crisis measures -- the future jobs fund and the six-month offer".

So, what better way to distract attention from all these fears of another downturn, and a double-dip recession, than to shoot the messenger? "Trash" Larry Elliott and his scoop. And target outspoken economists like the New Statesman's David "Danny" Blanchflower, one of this country's leading labour-market economists and professor of economics at Dartmouth College.

Danny has written, for example, that he is "now convinced that as a result of this reckless Budget the UK will suffer a double-dip recession or worse". In this week's issue of the magazine, he writes:

Cameron's claim of future falls in unemployment is simply not credible. I will be watching the labour-market data and will report back regularly. Sadly for the British people, Cameron is going to have to eat his words.

Danny is one of a handful of economists who can plausibly claim to have seen the recession coming (unlike former colleagues of his on the Bank of England's Monetary Policy Committee, who included, of course, Mervyn King -- the man now venerated by George Osborne and Nick Clegg). He has been invoked by panellists on BBC1's Question Time for the past two weeks running. He is a high-profile and credible academic. Does the Conservative-led coalition or its media echo chamber choose to engage with his points, arguments or data?

Nope. The Treasury minister Justine Greening dismissed Danny on BBC2's Newsnight as a "Daily Mirror columnist" and her fellow panellist, the businessman Sir Martin Sorrell, described him as a "left-winger" (as if that label, in and of itself, discredits him -- although on the Cameron-admiring, Daily Mail-fearing Beeb, perhaps it does!). The former Tory chancellor Norman Lamont (he of "unemployment is a price worth paying" infamy) used a column in the Telegraph to condemn him as the "Labour-supporting former member" of the MPC. And Martin Vander Weyer, in this week's Spectator, belittles him as a "motormouth economist" and the "left-leaning former Bank of England Monetary Policy Committee member".

How often do you hear economists referred to as "right-leaning" or "right-wing" or "Conservative-supporting"? It's hard to avoid the conclusion that this is a deliberate tactic by the Tories and their echo chamber in the media and online. What we are witnessing are conscious and co-ordinated attempts to discredit and marginalise voices such as Elliott's and Blanchflower's -- credible and authoritative voices which, however, are out of sync with the coalition's consensus on cuts.

But I take comfort in that classic quote by Gandhi:

First they ignore you, then they laugh at you, then they fight you, then you win.

UPDATE: On a related note, Mr John Bloomfield from Twickenham in Middlesex has a letter published in the magazine this week, in which he writes:

Alas, it seems David Blanchflower is becoming further at odds with the consensus with every tirade against public spending cuts.

Yes, John, but the last time Danny was outside the consensus (or the groupthink) on the MPC, in 2008, it turned out that he was right and the consensus (against rate cuts) was wrong.

Mehdi Hasan is a contributing writer for the New Statesman and the co-author of Ed: The Milibands and the Making of a Labour Leader. He was the New Statesman's senior editor (politics) from 2009-12.

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I was wrong about Help to Buy - but I'm still glad it's gone

As a mortgage journalist in 2013, I was deeply sceptical of the guarantee scheme. 

If you just read the headlines about Help to Buy, you could be under the impression that Theresa May has just axed an important scheme for first-time buyers. If you're on the left, you might conclude that she is on a mission to make life worse for ordinary working people. If you just enjoy blue-on-blue action, it's a swipe at the Chancellor she sacked, George Osborne.

Except it's none of those things. Help to Buy mortgage guarantee scheme is a policy that actually worked pretty well - despite the concerns of financial journalists including me - and has served its purpose.

When Osborne first announced Help to Buy in 2013, it was controversial. Mortgage journalists, such as I was at the time, were still mopping up news from the financial crisis. We were still writing up reports about the toxic loan books that had brought the banks crashing down. The idea of the Government promising to bail out mortgage borrowers seemed the height of recklessness.

But the Government always intended Help to Buy mortgage guarantee to act as a stimulus, not a long-term solution. From the beginning, it had an end date - 31 December 2016. The idea was to encourage big banks to start lending again.

So far, the record of Help to Buy has been pretty good. A first-time buyer in 2013 with a 5 per cent deposit had 56 mortgage products to choose from - not much when you consider some of those products would have been ridiculously expensive or would come with many strings attached. By 2016, according to Moneyfacts, first-time buyers had 271 products to choose from, nearly a five-fold increase

Over the same period, financial regulators have introduced much tougher mortgage affordability rules. First-time buyers can be expected to be interrogated about their income, their little luxuries and how they would cope if interest rates rose (contrary to our expectations in 2013, the Bank of England base rate has actually fallen). 

A criticism that still rings true, however, is that the mortgage guarantee scheme only helps boost demand for properties, while doing nothing about the lack of housing supply. Unlike its sister scheme, the Help to Buy equity loan scheme, there is no incentive for property companies to build more homes. According to FullFact, there were just 112,000 homes being built in England and Wales in 2010. By 2015, that had increased, but only to a mere 149,000.

This lack of supply helps to prop up house prices - one of the factors making it so difficult to get on the housing ladder in the first place. In July, the average house price in England was £233,000. This means a first-time buyer with a 5 per cent deposit of £11,650 would still need to be earning nearly £50,000 to meet most mortgage affordability criteria. In other words, the Help to Buy mortgage guarantee is targeted squarely at the middle class.

The Government plans to maintain the Help to Buy equity loan scheme, which is restricted to new builds, and the Help to Buy ISA, which rewards savers at a time of low interest rates. As for Help to Buy mortgage guarantee, the scheme may be dead, but so long as high street banks are offering 95 per cent mortgages, its effects are still with us.