Why Britain is not Portugal

George Osborne is wrong to argue that Portugal’s woes make the case for his spending cuts.

Demonstrating once again that he is much better at politics than he is at economics, George Osborne has cited Portugal's request for an EU bailout as further evidence that those opposed to his excessive spending cuts are playing "Russian roulette" with Britain's national sovereignty.

"Today, of all days, we can see the risks that would face Britain if we were not dealing with our debts and paying off our national credit card. These risks are not imaginary," he said.

What the Chancellor refuses to acknowledge is that Britain, unlike Portugal, Greece and Ireland, can afford to meet its debts over a sustained period of time (even under his plans, debt will be 68.8 per cent of GDP in 2014-2015). As Duncan Weldon points out, the average maturity of UK government debt is currently around 14 years, while Portugal's is 6.8.

Indeed, the Barclays Capital Fiscal Vulnerability Index (see Table 3.1 of the IFS Green Budget), ranks the UK first for public debt duration and as joint first on the percentage of borrowing that is in domestic currency (leaving it less exposed to the foreign bond markets).


Britain's large structural deficit means that its overall rating is worse, but even then we're ranked 32nd, next to Japan (31st) and the United States (30th), and above India (35), France (39), Poland (40), Spain (42) and Italy (51). What's more, Osborne's premature cuts and the resultant collapse in economic growth have prompted the Office for Budget Responsibility to revise its borrowing forecasts up by £44.5bn. The Chancellor may claim that Labour lacks a "credible deficit reduction plan" but, without growth, so does he.

There is, however, one big similarity between Portugal and the UK. They were both among just five EU countries to suffer negative growth in the final quarter of 2010 (the others were Greece, Ireland and Denmark).

This week's economic survey by the British Chambers of Commerce suggests that the situation may be even worse than thought. According to the BCC, the economy may have grown by just 0.1-0.2 per cent in the six months to March.

Osborne's fixation on deficit reduction, rather than growth, means that he deserves neither and will lose both.

UPDATE: The excellent Will Straw points out that the OECD's new report includes even more evidence that Britain is not Portugal.

George Eaton is political editor of the New Statesman.

Photo: Getty Images
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The buck doesn't stop with Grant Shapps - and probably shouldn't stop with Lord Feldman, either

The question of "who knew what, and when?" shouldn't stop with the Conservative peer.

If Grant Shapps’ enforced resignation as a minister was intended to draw a line under the Mark Clarke affair, it has had the reverse effect. Attention is now shifting to Lord Feldman, who was joint chair during Shapps’  tenure at the top of CCHQ.  It is not just the allegations of sexual harrassment, bullying, and extortion against Mark Clarke, but the question of who knew what, and when.

Although Shapps’ resignation letter says that “the buck” stops with him, his allies are privately furious at his de facto sacking, and they are pointing the finger at Feldman. They point out that not only was Feldman the senior partner on paper, but when the rewards for the unexpected election victory were handed out, it was Feldman who was held up as the key man, while Shapps was given what they see as a relatively lowly position in the Department for International Development.  Yet Feldman is still in post while Shapps was effectively forced out by David Cameron. Once again, says one, “the PM’s mates are protected, the rest of us shafted”.

As Simon Walters reports in this morning’s Mail on Sunday, the focus is turning onto Feldman, while Paul Goodman, the editor of the influential grassroots website ConservativeHome has piled further pressure on the peer by calling for him to go.

But even Feldman’s resignation is unlikely to be the end of the matter. Although the scope of the allegations against Clarke were unknown to many, questions about his behaviour were widespread, and fears about the conduct of elections in the party’s youth wing are also longstanding. Shortly after the 2010 election, Conservative student activists told me they’d cheered when Sadiq Khan defeated Clarke in Tooting, while a group of Conservative staffers were said to be part of the “Six per cent club” – they wanted a swing big enough for a Tory majority, but too small for Clarke to win his seat. The viciousness of Conservative Future’s internal elections is sufficiently well-known, meanwhile, to be a repeated refrain among defenders of the notoriously opaque democratic process in Labour Students, with supporters of a one member one vote system asked if they would risk elections as vicious as those in their Tory equivalent.

Just as it seems unlikely that Feldman remained ignorant of allegations against Clarke if Shapps knew, it feels untenable to argue that Clarke’s defeat could be cheered by both student Conservatives and Tory staffers and the unpleasantness of the party’s internal election sufficiently well-known by its opponents, without coming across the desk of Conservative politicians above even the chair of CCHQ’s paygrade.

Stephen Bush is editor of the Staggers, the New Statesman’s political blog.