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.