Mehdi Hasan: Borrowing is bad - unless Gideon's doing it

Not only has growth stalled and austerity failed but the Tories can't even win the economic argument.

As I watched the Chancellor deliver his Autumn Statement to MPs yesterday, I couldn't help but remember his 2010 conference speech in Birmingham and, in particular, this bit of the speech:

Imagine, if I were to stand up in the House of Commons in two weeks time and say: I'm cancelling the deficit plan.

I agree with Ed Miliband.

Let's delay the tough decisions.

Let's borrow more.

Let's go on adding to our debt.

Imagine if I said that.

Now imagine what would follow.

The market turmoil.

The flight of investors.

The dismay of business.

The loss of confidence.

The credit downgrade.

The sharp rise in real interest rates.

The extra debt interest.

The lost jobs. The cancelled investment. The businesses destroyed. The recovery halted.

The return of crippling economic instability.

Britain back on the brink.

Hmm. Yesterday, George Osborne stood up in the Commons to reluctantly reveal that he would indeed be borrowing more - an astonishing £158bn more than he had planned to in last October's Spending Review and an embarrassing £37bn more than the much-mocked Labour plan (or "Darling plan") to cut the deficit in half over the lifetime of this parliament (as outlined in the March 2010 budget).

The Opposition has put together these two tables below, based on yesterday's OBR figures:

OBR's forecasts for public sector net borrowing (£bn)
  2011/12 2012/13 2013/14 2014/15 2015/16
November 2010 117 91 60 35 18
November 2011 127 120 100 79 53
Change since Nov 2010 +10 +29 +40 +44 +35






OBR's forecasts for public sector net borrowing (£ bn)
  2011/12 2012/13 2013/14 2014/15 2015/16
June 2010 (pre-Emergency Budget) 127 106 85 71 n/a
November 2011 127 120 100 79 53
Change since before Emergency Budget 0 +14 +15 +8 n/a

 

Then there is the graph (number 2) put together by our friends at the Spectator which shows that public sector net debt, as a percentage of GPD, will be higher in 2014/2015 than it was forecast to have been under - yep, you guessed it! - the afore-mentioned Darling plan. ("We are sinking in a sea of debt," shrieked the Chancellor in his conference speech in 2009. Now we know that, despite his savage cuts, we'll still be "sinking" in an ever-greater "sea of debt" at the next election.)

So what I'm wondering is: why isn't "Britain back on the brink"? If the country was on the verge of defaulting on its debts and being downgraded by the credit rating agencies when borrowing was forecast to be lower and growth higher - under the Darling plan - back in 2009 and 2010, why don't the latest OBR figures - which also downgrade growth for the fourth (!) time since Osborne took over at the Treasury - presage financial and economic armageddon? Isn't this the best evidence for the claim by Joseph Stiglitz, the Nobel Prize-winning economist, that the then shadow chancellor was guilty of "scaremongering" about borrowing and debt in an interview in the New Statesman in February 2010?

Referring to Cameron and Osborne as modern-day "Hooverites", Stiglitz said:

I say you're crazy -- economically you clearly have the capacity to pay. The debt situation has been worse in other countries at other times. This is all scaremongering, perhaps linked to politics, perhaps rigged to an economic agenda, but it's out of touch with reality.

Before the Tory trolls arrive below the line to shout about bond markets, confidence and low interest rates, I don't deny Osborne's contention that "debt interest payments over the Parliament are forecast to be £22 billion less than predicted". But I do dispute his description of Britain as a "safe haven". And I ask the deficit fetishists: if low rates are a sign of economic success and market confidence, why then did Japan enjoy such low rates in the mid-90s, during its "lost decade"? Why have borrowing costs in the United States, in the aftermath of its fiscal stimulus, the failure to sign off on spending cuts and its credit-downgrade by Standard & Poors, plummeted to historic lows?

Sticking with the subject of "confidence, the eminent economist, former Tory frontbencher and biographer of Keynes, Robert Skidelsky, writes in today's Guardian:

We come to the question of confidence. The chancellor has repeatedly claimed the deficit reduction programme was, and is, necessary to maintain investor confidence in government finances. Confidence is very important, but also mysterious: the bond markets can believe a dozen contradictory things before breakfast. The main point is that confidence cannot be separated from the economy's performance. As it stalls, the creditworthiness of governments declines as their debt increases, raising the likelihood of default.

A year ago bond traders, having forgotten what little economic theory they knew, were inclined to believe that deficit reduction would in itself generate recovery. For several months the Osbornites fed them the fantasy of "expansionary fiscal contraction", the idea that as the deficit falls the economy would expand. This story is now exploded. It's the economy that determines the size of the deficit, not the deficit that determines the size of the economy.

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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Don’t blame young people for not voting – blame the system that fails them

The majority of young people voted to Remain in the EU, but turn out was low. But this is a symptom of an unfair system, not a recent to punish them.

“A Britain divided” – that has been the dominant narrative to emerge in the aftermath of the Brexit vote a week ago. There has been talk of the divisions between rich and poor, the metropolitan and the regional, the Scottish and the English/Welsh, but perhaps the most vehement discussion has centred around the gulf between generations. Polling indicates that 75 per cent of 18-24 year olds voted Remain, while Electoral Commission data showed that, in urban areas where the average age was 35 and under, there was overwhelming support for remaining in the EU.

Older people, meanwhile, voted to leave, which is why the morning after the result, social media erupted in fury at the baby boomers and their parents accused of cocking up our futures (for it is we who will live longest with the fallout, after all). Rarely have I seen such vehemence directed at the old by the young.

There was, of course, the inevitable backlash. Generation Y, boomers argued, just couldn’t be arsed to wrench themselves away from their screens to go and vote. We don’t know the turnout figures for certain, but Sky data indicates it may have been shockingly low – 36 per cent for 18-24 year olds, and 58 per cent for those between 25-34. There was more than a whiff of disdainful superiority in the air from some of the older generation – many of their criticisms amounted to “shut up and stop whining”, or, “you’ll come crawling back when you need cash from the bank of mum and dad”. Worst of all was being told to bow down and respect our elders in their infinite superior knowledge.

Let’s say, for the sake of argument, that young turnout was as low as estimates suggest. Can this really be said to be an indictment of young people, or is it really an indictment of a system that alienates them utterly? There is a whiff of blaming the victims to all this. As Ben Bowman, a researcher on young people’s politics from the University of Bath tells me, “turnout and ‘low engagement’ are symptoms of an illness, not the illness itself. The illness is politics done at a distance from young people.”

Something else Bowman says resonates particularly with me, as someone who took part in the 2010 student protests against tuition fee rises and cuts to EMA, and then sunk into political disillusionment and disgust that our voices had meant nothing to the politicians implementing policy. “I can’t overstate the extent to which young people feel politics is about people needing things and being told ‘well, we haven’t got the money.’ The Iraq war, tuition fees and austerity have really shrunk the horizons of what young people consider possible. They are just trying to get by, to play by the rules and navigate increased risk in transition to adulthood.”

For this reason, as well as many others, it is unfair to heap derision on the young who didn’t vote (and for what it’s worth, some experts have said they actually think turnout may have been up). Dr James Sloam from the Department of Politics and International Relations at Royal Holloway university points out that public policy decisions have generally been against our interests. While rich pensioners keep their winter fuel allowance, their free TV licences and travel passes, we face the highest tuition fees in the western world, the closure of youth centres, a living wage that only starts at 25, and cuts to housing benefit. Why participate in a system that hates you?

Of course, the easy rebuttal to this is the fact that, unless you participate, the politicians (and the policies they create) will continue to ignore you. There’s an element of truth to this, but it fails to take into account several things. Firstly, thanks to our first past the post electoral system, there is a perception that, even if you do vote, that it doesn’t really count, and certainly doesn’t change anything. Secondly, there is the mantra, one you’ll hear again and again, that all politicians are the same. As Kelly McBride from The Democratic Society says:

“To large numbers of people the political system, party politics, the institutions of statehood seem like immutable objects. You cannot change the way that politics is done, or upheave centuries of tradition, or fight against what you consider the overwhelming social power of Oxbridge politicians and their friends running international business ventures.

“Why bother to swap one boring suit for another when nothing has got better for you or your family? As the old adage goes, “no matter who you vote for, a politician always gets in.”

These are words worth bearing in mind to those in the establishment still baffled by the popularity of Jeremy Corbyn, who at the time of writing is refusing to budge as Labour leader, amongst younger people. McBride tells me that my generation’s disenfranchisement is not just from the political apparatus of state, but from ideology, too. While older people can remember what it was like to have a political party formed on the basis of ideology, “young people today can probably count the number of politicians who seem to act out of principle or ideology on one hand, and such figures are roundly ridiculed in the press for being high-minded or weak leaders”. Sound like anyone we know?

If we are to get young people voting, it’s clear we need a wider range of politicians. A Demos/Vinspired report found that 56 per cent of young people would be more likely to vote if there were more local working class MPs. We also need more women, more candidates from diverse backgrounds, and younger representatives (just look at the 21-year-old SNP MP Mhairi Black, whose maiden speech went viral). The EU referendum campaign on both sides reflected this paucity perhaps more than any campaign that I can remember. Where were the women, the young people? It was basically just grey-haired men in suits arguing. When there was a debate for young people, it portrayed the sides as evenly split between leave and remain, thus giving a distorted view of how younger people felt about the issues involved.

I’m also not convinced that – despite the valiant efforts of campaign groups such as Bite the Ballot – was entirely made clear how important it was that young people registered to vote in this election. Many seemed unaware that their vote could have been a game-changer until afterwards. Plus, young people are notoriously peripatetic, and many will not have been at their term-time addresses. The registration system saw 1m people fall off the register. It fell by 40 per cent.

Before the referendum, an article for UKandEU argued that young voters are rarely anti-EU; they just don’t understand it. To my mind, the campaign did not help to clarify the already-murky waters. The impression I get from friends and acquaintances is that the EU debate led to a lack of confidence in terms of knowledge and understanding of the issues at hand that was not helped by politicians' statements or media coverage of them. “I don’t feel I know enough” was a phrase I heard again and again. It’s not something you hear so much from the older generation.

And if this referendum made anything clear, it was that not understanding the issues at hand didn’t put older people off voting. Perhaps it is the young who are truly wise. As Richard Bronk, a Visiting Fellow at the European Institute at LSE wrote in a recent blog post:

“The world has changed so fast that the Platonic idea of respecting the greater wisdom of the elderly is out of date . . . it is most of us over fifty who have no idea how social and economic life really operates in the interdependent, fluid and digital age in which our children live.” 

Rhiannon Lucy Cosslett is a writer for the New Statesman and the Guardian. She co-founded The Vagenda blog and is co-author of The Vagenda: A Zero Tolerance Guide to the Media.