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24 September 2010updated 27 Sep 2015 2:12am

Hancock lets one off half-cocked

Another day, another folio of folly from the Tory econopseud.

By Patrick Osgood

He’s been shown to have little sapience when it comes to sovereign debt markets, and scribbled a disasterous analogy in yesterday’s Times in defence of the coalition’s deficit reduction programme. Matthew Hancock has now produced/received from George Osborne an attack dossier for the Tory rank and file to roll up and smack round the head of the winning Miliband, should the sainted Ed or his big brother dare question why a quarter of public sector spending and 177 quangos are being scrapped. All at once.

The dossier (PDF), with its odd use of big red typeface, is comprised of some fag-packet sums and a salad of quotations, taken out of context, from the course of the Labour leadership debates (kicking off with one from a candidate whose last name isn’t Miliband, and who will have no role on economic policy in opposition).

As the Spectator notes, the dossier — thinking about it, it’s too flimsy a concoction to be worthy of the name — has a certain robust internal consistency to it. But then, so does Mao’s Little Red Book. But its virtues end there.

The missal’s flaw is that it makes sense only if you have raised the question of whether ruthless fiscal conservativism is the only way to go. As with Hancock’s bond-market assertion, the whole thing falls apart as soon as you examine it under the microscope of the dismal science.

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But the name of the game is dominant, entrenched ideology, not economics, so let’s talk tactics.

The victorious Miliband will not have helped himself any by deciding to back Alistair Darling’s prescription for economic recovery. Strategically, this has framed the debate in terms with which the Conservatives are at consummate ease: waste, competitiveness, cupboard is bare, yadayadayada; the masochistic hair shirt of austerity under the cassock of propriety. Politically, the Tory-led coalition will be better at it than Labour, because that’s what they do.

It was open to both Milibands to examine the credible alternative of:

1) recognising that all those bank bailout billions were only enough to prevent the collapse of the banking industry without changing it;

2) we would be heading for a sustained period in which global demand would be weak and stringent new capital requirements would disincentivise commercial lending, and so

3) to get the economy of its knees, further fiscal stimulus would be required, together with innovation by the Bank of England to — among other things — increase the inflationary target rate to (say) 3 per cent to stop investors hoarding gilts and instead get their cash out to market to generate returns.

Sadly, the Milibands have so far flunked it, preferring to defend a policy that had failed the party and was unpopular with the electorate.

But there’s hope yet. Ed Balls is likely (one hopes) to become shadow chancellor, whatever the leadership election outcome. Labour’s position on the economic recovery will move markedly from Darling’s position, and its success will rest on the cogency of Balls’s case and his ability to dominate the coalition thirtysomethings at the despatch box.

Balls, unlike Darling, will not be making the case against the Tories on their own Tea Party terms, making Hancock’s missal redundant. And a good thing, too.

After all, if Clegg, Cable and co can completely flim-flam on fiscal policy, what’s to stop a post-New Labour adjustment from the opposition?