The revolt against Osborne grows

Lib Dem MPs join economists in calling for a change of course.

Our exclusive story on how once supportive economists have turned against George Osborne has made the front page of today's Guardian, with the rest of Fleet Street, including the Mail and the Telegraph, also following up the piece, which appears in full in this week's magazine.

The Guardian leads on this week's New Statesman cover story.

And there's more bad news for Osborne today. The FT's Kiran Stacey reports that Lib Dem MPs are also now urging Osborne to take advantage of the UK's record low borrowing rates and stimulate growth through higher capital spending. John Pugh, the co-author of the party's 2010 economic policy, tells the paper:

We need to look again very carefully at the implications of the sharp reduction we have seen in capital expenditure.

There are a fair number of people who think that if we returned to the plans as conceived by Vince Cable . . . we would be in a slightly healthier position than we are.

Pugh is right. Osborne's decision to reduce capital expenditure - the most valuable spending, according to the OBR - by 48% (£24.3bn) is one of the main reasons why the UK, with the exception of Italy, is the only G20 member in recession.

When it was pointed out to Pugh that it would be difficult for the Chancellor to perform such a U-turn, he rightly replied:

The situation is serious enough now for people not to be bothered about what you call the plan.

Two other MPs - Annette Brooke and John Leech - make similar calls, and a senior economic adviser to the party comments: "We may have to resort to emergency measures to stimulate demand. We have already let the timetable on eliminating the deficit slip: we may have to do that again."

Perhaps most significantly, Stacey reports that party president Tim Farron is being urged by the Lib Dem leadership to call for deficit-funded spending "in order to give Nick Clegg, the deputy prime minister, a mandate to argue for it at the top of government."

The Lib Dems' restlessnes is unsurprising. As even the IMF has stated, there is no evidence that a reduced pace of deficit reduction would trigger a rise in British bond yields. With investors increasingly reluctant to lend to eurozone countries, the UK is, as Osborne has observed, a "safe haven". Yet, for no other reason other than political pride, the Chancellor is unwilling to change direction. Borrowing for growth would be a tacit admission that his nemesis, Ed Balls, was right and he was wrong. But until Osborne is prepared to take this step, there is no prospect of recovery, for either the economy or his party.

George Osborne is under increasing pressure to stimulate growth through higher infrastructure spending. Photograph: Getty Images.

George Eaton is political editor of the New Statesman.

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Hannan Fodder: This week, Daniel Hannan gets his excuses in early

I didn't do it. 

Since Daniel Hannan, a formerly obscure MEP, has emerged as the anointed intellectual of the Brexit elite, The Staggers is charting his ascendancy...

When I started this column, there were some nay-sayers talking Britain down by doubting that I was seriously going to write about Daniel Hannan every week. Surely no one could be that obsessed with the activities of one obscure MEP? And surely no politician could say enough ludicrous things to be worthy of such an obsession?

They were wrong, on both counts. Daniel and I are as one on this: Leave and Remain, working hand in glove to deliver on our shared national mission. There’s a lesson there for my fellow Remoaners, I’m sure.

Anyway. It’s week three, and just as I was worrying what I might write this week, Dan has ridden to the rescue by writing not one but two columns making the same argument – using, indeed, many of the exact same phrases (“not a club, but a protection racket”). Like all the most effective political campaigns, Dan has a message of the week.

First up, on Monday, there was this headline, in the conservative American journal, the Washington Examiner:

“Why Brexit should work out for everyone”

And yesterday, there was his column on Conservative Home:

“We will get a good deal – because rational self-interest will overcome the Eurocrats’ fury”

The message of the two columns is straightforward: cooler heads will prevail. Britain wants an amicable separation. The EU needs Britain’s military strength and budget contributions, and both sides want to keep the single market intact.

The Con Home piece makes the further argument that it’s only the Eurocrats who want to be hardline about this. National governments – who have to answer to actual electorates – will be more willing to negotiate.

And so, for all the bluster now, Theresa May and Donald Tusk will be skipping through a meadow, arm in arm, before the year is out.

Before we go any further, I have a confession: I found myself nodding along with some of this. Yes, of course it’s in nobody’s interests to create unnecessary enmity between Britain and the continent. Of course no one will want to crash the economy. Of course.

I’ve been told by friends on the centre-right that Hannan has a compelling, faintly hypnotic quality when he speaks and, in retrospect, this brief moment of finding myself half-agreeing with him scares the living shit out of me. So from this point on, I’d like everyone to keep an eye on me in case I start going weird, and to give me a sharp whack round the back of the head if you ever catch me starting a tweet with the word, “Friends-”.

Anyway. Shortly after reading things, reality began to dawn for me in a way it apparently hasn’t for Daniel Hannan, and I began cataloguing the ways in which his argument is stupid.

Problem number one: Remarkably for a man who’s been in the European Parliament for nearly two decades, he’s misunderstood the EU. He notes that “deeper integration can be more like a religious dogma than a political creed”, but entirely misses the reason for this. For many Europeans, especially those from countries which didn’t have as much fun in the Second World War as Britain did, the EU, for all its myriad flaws, is something to which they feel an emotional attachment: not their country, but not something entirely separate from it either.

Consequently, it’s neither a club, nor a “protection racket”: it’s more akin to a family. A rational and sensible Brexit will be difficult for the exact same reasons that so few divorcing couples rationally agree not to bother wasting money on lawyers: because the very act of leaving feels like a betrayal.

Or, to put it more concisely, courtesy of Buzzfeed’s Marie Le Conte:

Problem number two: even if everyone was to negotiate purely in terms of rational interest, our interests are not the same. The over-riding goal of German policy for decades has been to hold the EU together, even if that creates other problems. (Exhibit A: Greece.) So there’s at least a chance that the German leadership will genuinely see deterring more departures as more important than mutual prosperity or a good relationship with Britain.

And France, whose presidential candidates are lining up to give Britain a kicking, is mysteriously not mentioned anywhere in either of Daniel’s columns, presumably because doing so would undermine his argument.

So – the list of priorities Hannan describes may look rational from a British perspective. Unfortunately, though, the people on the other side of the negotiating table won’t have a British perspective.

Problem number three is this line from the Con Home piece:

“Might it truly be more interested in deterring states from leaving than in promoting the welfare of its peoples? If so, there surely can be no further doubt that we were right to opt out.”

If there any rhetorical technique more skin-crawlingly horrible, than, “Your response to my behaviour justifies my behaviour”?

I could go on, about how there’s no reason to think that Daniel’s relatively gentle vision of Brexit is shared by Nigel Farage, UKIP, or a significant number of those who voted Leave. Or about the polls which show that, far from the EU’s response to the referendum pushing more European nations towards the door, support for the union has actually spiked since the referendum – that Britain has become not a beacon of hope but a cautionary tale.

But I’m running out of words, and there’ll be other chances to explore such things. So instead I’m going to end on this:

Hannan’s argument – that only an irrational Europe would not deliver a good Brexit – is remarkably, parodically self-serving. It allows him to believe that, if Brexit goes horribly wrong, well, it must all be the fault of those inflexible Eurocrats, mustn’t it? It can’t possibly be because Brexit was a bad idea in the first place, or because liberal Leavers used nasty, populist ones to achieve their goals.

Read today, there are elements of Hannan’s columns that are compelling, even persuasive. From the perspective of 2020, I fear, they might simply read like one long explanation of why nothing that has happened since will have been his fault.

Jonn Elledge is the editor of the New Statesman's sister site CityMetric. He is on Twitter, far too much, as @JonnElledge.