The UK isn't a "safe haven", it's just stagnant

Lower borrowing costs are a reflection of economic weakness, not strength.

"The difficult decisions on the deficit have made the UK a safe haven in the recent economic storm," boasted George Osborne in his response to last week's anaemic GDP figures. Today, the Chancellor and his advisers are pointing to the fact that the cost of borrowing yesterday fell to its lowest level for over 50 years as proof of that claim. A spokesman for Osborne said:

"It's a vote of confidence, one of the key aspects of our plan has been a tight fiscal policy combined with a loose monetary policy, it's the right mix for economic growth, and the need to rebalance towards exports and away from consumption."

The yield on 10-year UK gilts has fallen to 2.76, which means far lower interest repayments on government debt, potentially saving the taxpayer billions of pounds. But is this really an unequivocally good news story, as Osborne suggests? After all, it's likely that the fall in rates has much much more to do with the fact that the Bank of England base rate is unlikely to rise until 2012, than it has with the supposed "strength" of the British economy.

Here's Paul Krugman's take:

Yields in the US have, of course, plunged rather than risen. And they've plunged for the same reason UK yields have plunged: a scarily weak economy suggests that it will be years before the central bank raises rates.

In a wonderful pay-off, he adds:

It's sad, actually: the wolf is at the door, and Osborne thinks it's the confidence fairy.

Over on his blog, Faisal Islam, Channel 4's excellent economics editor, makes the same point and highlights an important experiment by the National Institute of Economic and Social Research. The NIESR points out that one would expect a fall in rates, if the result of increased economic confidence, to correlate with a rise in the FTSE-100. But after crunching the numbers, the body found no such relationship. NIESR director Jonathan Portes concluded: "Low long-term interest rates appear to reflect economic weakness and lack of market confidence in the prospects of the UK economy, not the reverse."

Over to you, Mr Osborne.

George Eaton is political editor of the New Statesman.

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Andy Burnham's full speech on attack: "Manchester is waking up to the most difficult of dawns"

"We are grieving today, but we are strong."

Following Monday night's terror attack on an Ariana Grande concert at the Manchester Arena, newly elected mayor of the city Andy Burnham, gave a speech outside Manchester Town Hall on Tuesday morning, the full text of which is below: 

After our darkest of nights, Manchester is today waking up to the most difficult of dawns. 

It’s hard to believe what has happened here in the last few hours and to put into words the shock, anger and hurt that we feel today.

These were children, young people and their families that those responsible chose to terrorise and kill.

This was an evil act. Our first thoughts are with the families of those killed and injured. And we will do whatever we can to support them.

We are grieving today, but we are strong. Today it will be business as usual as far as possible in our great city.

I want to thank the hundreds of police, fire and ambulance staff who worked throughout the night in the most difficult circumstances imaginable.

We have had messages of support from cities around the country and across the world, and we want to thank them for that.

But lastly I wanted to thank the people of Manchester. Even in the minute after the attack, they opened their doors to strangers and drove them away from danger.

They gave the best possible immediate response to those who seek to divide us and it will be that spirit of Manchester that will prevail and hold us together.

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