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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Want to send a positive Brexit message to Europe? Back Arsene Wenger for England manager

Boris Johnson could make a gesture of goodwill. 

It is hard not to feel some sympathy for Sam Allardyce, who coveted the England job for so many years, before losing it after playing just a single match. Yet Allardyce has only himself to blame and the Football Association were right to move quickly to end his tenure.

There are many candidates for the job. The experience of Alan Pardew and the potential of Eddie Howe make them strong contenders. The FA's reported interest in Ralf Rangner sent most of us scurrying to Google to find out who the little known Leipzig manager is. But the standout contender is Arsenal's French boss Arsene Wenger, 

Would England fans accept a foreign manager? The experience of Sven Goran-Eriksson suggests so, especially when the results are good. Nobody complained about having a Swede in charge the night that England won 5-1 in Munich, though Sven's sides never won the glittering prizes, the Swede proving perhaps too rigidly English in his commitment to the 4-4-2 formation.

Fabio Capello's brief stint was less successful. He never seemed happy in the English game, preferring to give interviews in Italian. That perhaps contributed to his abrupt departure, falling out with his FA bosses after he seemed unable to understand why allegations of racial abuse by the England captain had to be taken seriously by the governing body.

Arsene Wenger could not be more different. Almost unknown when he arrived to "Arsene Who?" headlines two decades ago, he became as much part of North London folklore as all-time great Arsenal and Spurs bosses, Herbert Chapman or Bill Nicholson, his own Invicibles once dominating the premier league without losing a game all season. There has been more frustration since the move from Highbury to the Emirates, but Wenger's track record means he ranks among the greatest managers of the last hundred years - and he could surely do a job for England.

Arsene is a European Anglophile. While the media debate whether or not the FA Cup has lost its place in our hearts, Wenger has no doubt that its magic still matters, which may be why his Arsenal sides have kept on winning it so often. Wenger manages a multinational team but England's football traditions have certainly got under his skin. The Arsenal boss has changed his mind about emulating the continental innovation of a winter break. "I would cry if you changed that", he has said, citing his love of Boxing Day football as part of the popular tradition of English football.

Obviously, the FA must make this decision on football grounds. It is an important one to get right. Fifty years of hurt still haven't stopped us dreaming, but losing to Iceland this summer while watching Wales march to the semi-finals certainly tested any lingering optimism. Wenger was as gutted as anybody. "This is my second country. I was absolutely on my knees when we lost to Iceland. I couldn't believe it" he said.

The man to turn things around must clearly be chosen on merit. But I wonder if our new Foreign Secretary Boris Johnson - albeit more of a rugger man himself - might be tempted to quietly  suggest in the corridors of footballing power that the appointment could play an unlikely role in helping to get the mood music in place which would help to secure the best Brexit deal for Britain, and for Europe too.

Johnson does have one serious bit of unfinished business from the referendum campaign: to persuade his new boss Theresa May that the commitments made to European nationals in Britain must be honoured in full.  The government should speed up its response and put that guarantee in place. 

Nor should that commitment to 3m of our neighbours and friends be made grudgingly.

So Boris should also come out and back Arsene for the England job, as a very good symbolic way to show that we will continue to celebrate the Europeans here who contribute so much to our society.

British negotiators will be watching the twists and turns of the battle for the Elysee Palace, to see whether Alain Juppe, Nicolas Sarkozy end up as President. It is a reminder that other countries face domestic pressures over the negotiations to come too. So the political negotiations will be tough - but we should make sure our social and cultural relations with Europe remain warm.

More than half of Britons voted to leave the political structures of the European Union in June. Most voters on both sides of the referendum had little love of the Brussels institutions, or indeed any understanding of what they do.

But how can we ensure that our European neighbours and friends understand and hear that this was no rejection of them - and that so many of the ways that we engage with our fellow Europeans rom family ties to foreign holidays, the European contributions to making our society that bit better - the baguettes and cappuccinos, cultural links and sporting heroes remain as much loved as ever.

We will see that this weekend when nobody in the golf clubs will be asking who voted Remain and who voted Leave as we cheer on our European team - seven Brits playing in the twelve-strong side, alongside their Spanish, Belgian, German, Irish and Swedish team-mates.

And now another important opportunity to get that message across suddenly presents itself.

Wenger for England. What better post-Brexit commitment to a new Entente Cordiale could we possibly make?

Sunder Katwala is director of British Future and former general secretary of the Fabian Society.