Comment: A new kind of ‘something for nothing’
Labour is missing a chance to challenge George Osborne's creative thinking
By Alex Stevenson Follow @alex__stevenson
It is one of the more exquisite ironies of British politics that the chancellor's solution to Britain's present misery is to adopt the approach which got us into this mess in the first place.
Being inside No 11 must have been easy for Gordon Brown. All those billions of pounds, sloshing around inside the Treasury's swollen coffers, ready to be distributed hither and thither.
Being inside No 11 in austerity Britain requires some more creative thinking. George Osborne's job is to come up with something for nothing – at least, something that doesn't pop up on the government's balance sheets.
The credit easing scheme announced on Sunday does exactly this. It will help the recovery by providing £20 billion of extra lending to the engines of the recovery, Britain's small- and medium-sized enterprises, without denting the government's deficit reduction strategy one jot. This £20 billion is not the government's money, after all. It just underwrites the banks' extra lending.
Osborne said yesterday this is a "low-risk" measure. Assuming we avoid financial Armageddon, he is correct. If the banks need bailout out following another mass default, he won't be in power much longer, anyhow. All in all, impressive work.
Today we see another example of the 'something for nothing' stratagem. Of the £30 billion being invested in infrastructure projects, most of it comes from pension funds. They have over £1 trillion sloshing around – an obvious target for a chancellor desperately needing to find money from somewhere, anywhere, to redivert.
The pension funds will require some form of tweaking of the rules to make infrastructure projects favourable. They will extract a good price from the government. But doing so will give Osborne what he wants: extra cash poured into the UK economy, without actually affecting the government's balance sheets. More impressive work from the chancellor.
Ironic, you might say, that Osborne's job is essentially about coming up with something for nothing. Ministers would just call you fatuous. Is this not the government presiding over a harsh regime of spending cuts designed to restore Britain's balance sheet? Is it not cleaning up the mess of the government's profligacy, and preventing the national debt from spiralling ever upwards in the process?
Well, yes, it is. This is a strategy broadly supported by the Organisation for Economic Cooperation and Development: it acknowledges the spending cuts are damaging the recovery, yes, but calls them "needed", too. The debate in British politics about the economy is completely ignoring this double-edged sword. British politicians can't cope with the cuts being both good and bad.
When Labour insists they are a catastrophic error the debate is reduced to a simple, irrelevant, meaningless dichotomy. So the big argument is no longer really about the situation on the ground. Labour would have pushed through cuts very close to those now advanced by the coalition. That means the divide is over a historical hypothetical, as to who was right 18 months ago – not who is right now.
By living in the past, the party which presided over 'something for nothing' is missing an opportunity to challenge Osborne's own 'something for nothing' trickery.
The chancellor's creative thinking will not get the grilling it deserves. The real questions we should be asking are about the risks he's taking on: the real price of the deal with the pension funds, and the real risk of underwriting the banks.
Instead we can expect the detail to be obscured in a fug of partisan bluster, far removed from the reality of life in stagnating Britain.
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