In the weeks after he took office, George Osborne justified his austerity programme by claiming that Britain was on “the brink of bankruptcy”. He told the Conservative conference in October 2010: “The good news is that we are in government after 13 years of a disastrous Labour administration that brought our country to the brink of bankruptcy.”
It was, of course, nonsense. With its own currency, its own monetary policy and the ability to borrow at historically low rates, the UK was never at risk of bankruptcy. In extremis, the Bank of England could simply buy up government debt (as it has done through its quantitative easing programme).
So it was pleasing to see the head of the Office for Budget Responsibility (OBR), Robert Chote, state as much on last night’s edition of Newsnight. He told Jeremy Paxman (from 15:17):
In terms of thinking about whether the government’s finances are sustainable, a key difference [between the UK and the eurozone] is that we are in a position where we have our own currency and in that sense we have a greater degree of flexibility that means the notion of the danger of insolvency is a much different question for us.
Having established the OBR to act as a check on the government (something for which Osborne deserves praise), the Chancellor might want to listen to its head and finally concede that there was no basis for his claim in 2010.