Why Labour should be wary of attacking Osborne over borrowing

By repeatedly criticising the Chancellor for missing his deficit targets, the party risks reinforcing the impression that borrowing is always an economic ill.

George Osborne is fond of boasting that the deficit has fallen "each and every year" under the coalition, so it was unfortunate for the Chancellor when revisions made by the ONS last week meant that borrowing was officially higher in 2012-13 (£118.8bn) than in 2011-12 (£118.5bn).

At today's Treasury questions, Ed Balls and the rest of Labour's hit squad repeatedly attempted to force the Chancellor to concede as much, but Osborne gave no ground. He (correctly) pointed out that borrowing was only higher last year (2012-13) because the ONS had revised the 2011-12 figure down (by £2.4bn), "which was actually good news", and that, in GDP terms, the deficit fell from 7.8 per cent to 7.7 per cent. Along the way, the vampiric Osborne suggested that taking lessons from Balls on how to balance the books was like "getting a lesson from Dracula on how to look after a blood bank". 

Still, the facts are the facts: on the measure traditionally favoured by the Chancellor, borrowing rose last year. In a final attempt to force the truth out of him, Balls raised a point of order with the Speaker, warning that Osborne may have "inadvertently misled the House", but Bercow brushed it aside.

In so doing, he may have done the shadow chancellor a favour. Balls might be right when he points out that Osborne has borrowed billions more than expected but this line of attack is less convincing when Labour's Keynesian strategy is explicitly based on borrowing even more. The difference, of course, is that while Labour would borrow for growth (in the form of higher infrastructure spending), the coalition is borrowing to meet the cost of failure (in the form of lower growth and higher long-term unemployment). But while this might be a coherent economic position, politically, it's a tough sell. 

Rather than becoming trapped in a technical debate about the deficit, Labour would be wiser to focus on living standards and growth, but if it wants to continue to attack Osborne on this territory it will need a much better explanation of its own approach. Without clearly setting out how and why it would borrow for growth, the party merely reinforces the impression that borrowing is always and everywhere an economic ill. And that only strengthens Osborne's hand. 

George Osborne and Ed Balls attend the State Opening of Parliament, in the House of Lords at the Palace of Westminster on May 8, 2013. Photograph: Getty Images.

George Eaton is political editor of the New Statesman.

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How Theresa May laid a trap for herself on the immigration target

When Home Secretary, she insisted on keeping foreign students in the figures – causing a headache for herself today.

When Home Secretary, Theresa May insisted that foreign students should continue to be counted in the overall immigration figures. Some cabinet colleagues, including then Business Secretary Vince Cable and Chancellor George Osborne wanted to reverse this. It was economically illiterate. Current ministers, like the Foreign Secretary Boris Johnson, Chancellor Philip Hammond and Home Secretary Amber Rudd, also want foreign students exempted from the total.

David Cameron’s government aimed to cut immigration figures – including overseas students in that aim meant trying to limit one of the UK’s crucial financial resources. They are worth £25bn to the UK economy, and their fees make up 14 per cent of total university income. And the impact is not just financial – welcoming foreign students is diplomatically and culturally key to Britain’s reputation and its relationship with the rest of the world too. Even more important now Brexit is on its way.

But they stayed in the figures – a situation that, along with counterproductive visa restrictions also introduced by May’s old department, put a lot of foreign students off studying here. For example, there has been a 44 per cent decrease in the number of Indian students coming to Britain to study in the last five years.

Now May’s stubbornness on the migration figures appears to have caught up with her. The Times has revealed that the Prime Minister is ready to “soften her longstanding opposition to taking foreign students out of immigration totals”. It reports that she will offer to change the way the numbers are calculated.

Why the u-turn? No 10 says the concession is to ensure the Higher and Research Bill, key university legislation, can pass due to a Lords amendment urging the government not to count students as “long-term migrants” for “public policy purposes”.

But it will also be a factor in May’s manifesto pledge (and continuation of Cameron’s promise) to cut immigration to the “tens of thousands”. Until today, ministers had been unclear about whether this would be in the manifesto.

Now her u-turn on student figures is being seized upon by opposition parties as “massaging” the migration figures to meet her target. An accusation for which May only has herself, and her steadfast politicising of immigration, to blame.

Anoosh Chakelian is senior writer at the New Statesman.

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