The Staggers

The New Statesman’s rolling politics blog

David Miliband's demolition of Osbornomics

Former foreign secretary deconstructs Osborne's economic myths.

By George Eaton Published 01 December 2011 18:24

David Miliband made a brilliant speech in the House of Commons yesterday in which he deconstructed four of George Osborne's key economic arguments, namely

1. That the Canadian example shows that a "contractionary expansion" is possible.

2. That private sector growth was previously crowded out by the public sector.

3. That the UK's record low bond yields are due to Osborne's deficit reduction programme.

4. That without austerity we would be in the same position as Greece.

As John Rentoul says, it's worth reading the speech in full, but to give you a taste, here's Miliband on why Osborne isn't responsible for falling bond yields.

The Chancellor says that international markets have voted with their feet in buying UK gilts and driving down yields over the last 18 months. However, the biggest buyer of gilts in recent years has been not the international markets but the Bank of England. I will not dwell on the fact that the Chancellor denounced quantitative easing when he was shadow Chancellor, but he surely knows that for this financial year the Bank of England will have bought no less than 42 per cent of gilt issuance. The Bank now owns more than 30 per cent of the total gilt stock, compared with zero in 2008, while the proportion of international market ownership has barely changed. Interest rates are low in this country because of Bank purchasing policy, not because of government fiscal policy.

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Tags: David Miliband

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15 comments

Fri, 2011-12-02 21:37 — matthew fox (not verified)

The self-inflicted economic tsuanmi Luddite, is that the one your talking about.

Your talking about an event that Cameron and Osborne have watched developed in 2011.

Why are you worried about a problem that has been in the headlines for months.

It a bit late to start panicking Luddite, why are you so behind the story?

Sun, 2011-12-04 13:36 — Call me Terry

Hi Guys,

All I can say is back David Miliband.

Thu, 2011-12-01 22:51 — stephenH (not verified)

@tiberius
Milliband is half right and you are totally wrong.

Bond yields are falling as the economy gets worse- and there is a near perfect linear relationship of falling borrowing costs for the government even as their borrowing forecasts are revised up and up...

http://www.leftfootforward.org/2011/11/no-gideon-low-gilt-yields-arent-g...

As to the views of the bond traders... well the US, and Japan were downgraded and bonds kept falling because the pension funds, banks etc just don't have anywhere else to invest it. We are in exactly the same boat because we are not in the Euro and can print money or as Milliband says get the bank to buy our own debt.

Thu, 2011-12-01 23:36 — Awake!

@StephenH
Do you really believe that bond traders will pile into UK debt believing on the basis that UK will print money to pay it back?
Earlier I made agreed that Milliband senior has provided an argument- it's wrong to think it's the reason why the yields are low though, it's a contributing factor though, necessarily.
The point is that Balls is such a buffon that he hasn't spotted this argument. Why? He's a grade A clown who knows nothing. His track record speaks for itself, yet he has plenty of supoorters. That says it all.

Tue, 2011-12-13 08:00 — john henry (not verified)

Boy Georgie is a cheap Tory snake oil merchant politcian. History will judge the devastation that his ideoolgically driven economic policy is having on this country.

Fri, 2011-12-02 02:56 — Fergus Pickering (not verified)

Do you know what 'deconstructs' means? No you don't. Then don't use it.

Fri, 2011-12-02 10:25 — Luddite (not verified)

So it was David who had the magic wand and not ED. Not even David's magical wand will prevent this coming economic tsunami.

Fri, 2011-12-02 10:47 — ang (not verified)

I just adore David Miliband, he should be our leader.

Mon, 2011-12-05 03:54 — Chintoo

What is he ferreting at?

Sat, 2011-12-03 15:17 — Indu Pendent (not verified)

@matt

Foxy, heard the one about "Gordon Brown was a good chancellor"... boom boom.

The bottom line is Labour left 3 crippling disfigurements behind them

- the biggest structural defict. The country does not generate enough wealth to pay for the public sector.

- Labour had it in for UK Industry and shrank it at the fastest rate since the 1970 during Gordon's miracle economic boom

- we are left with an enormous national debt.

So which of these does Labour include more of in Plan B?

Sat, 2011-12-10 14:17 — Freeman2

Fergus Pickering writes, 'Do you know what 'deconstructs' means? No you don't. Then don't use it.'

The least you can do is give us your interpretation of what it means ('means'?) and then give us an example.

Sat, 2011-12-03 20:14 — matthew fox (not verified)

Gideon bust bust.

The bottom line is the disengagement of Osborne it this crisis.

Would you like to inform me of the National Debt in 1997.

Unlike you Inbrew, I dont fall for the Rolls Royce economy gag.

Plan A is what it is, failure with capital A.

Thu, 2011-12-01 18:52 — rob andersen (not verified)

ah finally an argument that makes sense...
'but he surely knows that for this financial year the Bank of England will have bought no less than 42 per cent of gilt issuance. '
That is finally a valid point- only taken a couple of months to find it.
What I've been telling u all along.
Balls is an idiot, rid yourselves of him... he coudn't construct an argument if his job depended on it...