Osborne calls for “honest debate” while manipulating the facts

George Osborne today outlines that "Voters deserve an honest debate and a real choice". But he continue to make false claims about the impact of Britain's debt.

In an article for the Daily Telegraph this morning, George Osborne outlines that “Voters deserve an honest debate and a real choice”. Why then does he continue to make false claims about the state of the economy while refusing to set out what he would do to reduce the deficit more quickly?

Central to Osborne’s article is the “riskiness of sovereign debt and the sustainability of public finances.” He makes a series of assertions that cannot be backed up:

“Before Sweden started dealing with their debts in the Nineties, it faced a market penalty of 4.5 per cent. Britain is borrowing more than Greece, and more than Sweden was”

The yield on a 10-year bond Greek 10 year bonds yield is currently 5.79% while the UK’s is 3.80%. So clearly the market is not lumping Britain in with Greece.

“If the Bank of England stops buying government bonds next year, as is expected, it believes market interest rates will rise almost another percentage point on top of that.”

A rise in one percentage point would put interest rates at 4.8%. But this is well below the average of the last twenty years (6.5%) and in line with the average of the last ten years (4.7%). George Osborne needs to explain how a bond yield of 4.8% represents a disaster, particularly since the yield was over 10% when Cameron was a special adviser in the Treasury in the early 1990s.

“If Britain follows Greece, the interest bill on a £150,000 mortgage could go up by more than £200 a month.”

The Chart below shows Bank of England data on the standard variable interest rate (SVR) on mortgages. One year ago the SVR was 6.34% while today it is 3.91%. This means that the monthly interest bill on a £150,000 mortgage is over £300 lower today than it was a year ago. In April 1997 the SVR was 7.22%. So last time the Tories were in power, the monthly mortgage rate was over £400 higher than today.

On the wider economy, Osborne is just as inaccurate.

“youth unemployment – which Gordon Brown pledged to abolish – is at an all-time high”

But as this blog pointed out last week, records only began in 1992 while the 1980s recession was far worse for young people.

“For the first time in my adult life, people are talking about leaving the country.”

Does he not remember Paul Daniels, Frank Bruno or Andrew Lloyd Webber?

Osborne, of course, is still to set out how the Conservatives would reduce the deficit further and faster than the halving over four years proposed by Labour. Indeed, Osborne’s article doesn’t even please his own side. As Tim Montgomerie of Conservative Home opines this morning:

“[George Osborne] is yet to announce a deficit reduction plan. We have had some austerity measures from the Tories but only a fraction of what is going to be necessary.”

22 Responses to “Osborne calls for “honest debate” while manipulating the facts”

  1. Alex Ross

    More #torylies from George Osborne, re: youth unemployment, sovereign debt and the economy: http://bit.ly/8NMfO4 Hat-tip: @leftfootfwd

  2. Ben Cooper

    RT @leftfootfwd: George Osborne wants an "honest debate" but can't help himself manipulating the data on debt http://bit.ly/8NMfO4

  3. Anon E Mouse

    Will – Why not provide a graph with the number of new mortgages taken out over that period.

    No one can get a mortgage any more so the graph is worthless and could be considered misleading in the context.

    Napoleon said “Lies, damn lies and statistics”. Seems we learn nothing in life.

    With the Tories back up with a 17 point lead again – why doesn’t LFF start publishing articles that Labour campaigners can use on the doorstep, positive stories to use in messages instead of this negative stuff about the opposition.

    People aren’t listening to Labour any more and with this type of negative stuff one can see why.

  4. Joanna

    um, so you haven’t actually identified anything George Osborne wrote that isn’t true, or that could even be characterised as “twisting the facts”. he is very clearly warning about would could happen if Labour win the election, not what is happening now

  5. Liz McShane

    Anon – that long list is a good starting point!

  6. Mark

    The mortgage rate comparison is silly Will. You probably know it too!

    The point is that if the public finances get out of control then interest rates will have to rise. This will choke off any economic recovery and put up mortgages. Sadly the UK is in such a fiscal pickle that this situation is quite possible.

  7. Anon E Mouse

    Liz – What long list?

    (NHS manager – something hospital based perhaps?)

  8. Jack Sutcliffe

    Interesting stuff from @leftfootforward http://trunc.it/48hrf well worth the read

  9. Anon E Mouse

    Liz – The public really doesn’t care about this green nonsense and just sees it as a means of raising taxes. They want to know what Labour is going to do for them personally. Why vote Labour?

    For example the Labour record on house building is lamentable – even Lord Hattersley said so on Friday night – and for him to criticise Labour shows how bad it really is.

    Why don’t Labour release funds to build council houses, using local builders in each area.

    Just think: workers could be working, suppliers could be supplying, manufacturers manufacturing, delivers delivering, builders building blah blah

    Now this post is more positive than any article on the LFF blog…

  10. Liz McShane

    Anon – I agree as I am a fan of keynesian economics….. but I do think that green/sustainability issues are increasingly pervading every day life & lives and people are making linkages with freak weather conditions/disasters that occur on the other side of the world – cause & effect.

  11. willstraw

    Thanks for the comments:

    Anon – I agree on social housing. It has been a lamentable failure that the party is only now turning its attention to. LFF has done a bit on this eg here and we plan to do more in future. On your earlier idea, I hope that many of the stories we write will provide useful material for Labour, Lib Dem and Green activists on the doorstep. Some of the time that will take the form of proposing new ideas and sometimes it will mean addressing the flawed claims of conservatives like Osborne’s article this morning. We make no apology for either.

    Liz – Absolutely agree that public support will come around as more freak weather conditions become the norm but think that the environment movement has also been poor at explaining the science, consequences of inaction, and benefits of adaptation to the public.

    Joanna – I don’t understand. We have pointed out five points in Osborne’s short article that aren’t true.

    Mark – Absolutely right. “ If the public finances get out of control then interest rates will have to rise” But there is no evidence that this is taking place. Osborne’s assertions are nothing but a series of scare stories.

  12. george

    if “freak weather conditions become the norm” then they will become the norm and no-one will care. i was flooded out 2 years ago. as was my neighbour who also has a house in florida. in florida he gets flooded every year and his house is designed for it.

  13. Anon E Mouse

    Liz – This green agenda is being forced down our throats which is fine for people in London on huge wages but for the rest of the country it is meaningless and just results in petrol getting dearer and dearer.

    Labour need to realise that there is NO public transport at the right times in Britain. How can shift workers get to and from their mornings and nights at work with the buses?

    The buses don’t run until six round here so the shift workers are stuffed and have to use their own transport. Since the government knows this they know they are penalising the very working class mass votes they need.

    Take that farce in Copenhagen over the last fortnight. Why is it OK for Prince Charles and Gordon Brown to take private jets (at our expense in Browns case) to the event?

    Before this government starts taxing the public to death they should consider the less well off in society and act like a Labour Party and not Tory light.

    That may get a few votes…

    (Secretary for a charity perhaps?)

  14. Liz

    Anon – in terms of curbing/re-directing expenditure my personal preference would be to avoid illegal wars and id cards.

    I don’t think a green agenda is being forced down anyone’s throat – it’s just common sense and realisation that we all need to take note and do something about it at the micro & macro level.

    Not everyone in London is on huge wages – I am not sure where you got that impression from.

    (business development/design & architecture)

  15. Mark

    Will, public finances are not out of control in Greece either. But they are being downgraded and they are paying more in interest costs. The same is happening in the UK. So not out of control but certainly the UK is in a weak position.

  16. Anon E Mouse

    Liz – The wars and ID cards I agree but that’s honestly a drop in the ocean compared to the mess we’re in. Personally I’d inflate our way out of it but I’m a techie and not financially astute…

    (I’d have said a “people” job but perhaps that is..)

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  18. Sean

    Will,

    Can you explain a few things for me. Firstly, how can you draw a comparison between the risk premium between Greece and the UK when the Greek economy was downgraded twice BECAUSE the new government refused to cut the deficit. We are not comparing like-for-like and in addition has the Greek CB undertaken a QE on the same scale as
    the BoE? You are not comparing like for like in this instance.

    If the rates for Bonds are 4.8% and the BoE base rate is 0.5% then the premium is 4.3% (obviously)… does this not shock you? The rates in the early 90s were high because the BoE suddenly raised rates. Again you are not comparing like-for-like scenarios here.

    SVR are not a good measure of average mortgage repayments because banks have clauses which stipulate a bare minimum which the SVR can fall to (a floor) and new mortgages are now on a fixed rate or any variable rates have a large mark up. This is ignoring that banks are demanding between 10-30% deposits when previously they were prepared to offer more than 100% LTV mortgages.

    Increasingly international investors are running away from the Gilt market and this is being propped up by the BoE and UK-domiciled banks being forced (yes, forced) by the FSA to purchase Gilts as part of their capital requirements.

  19. WP Themes

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  20. Marks

    It doesn’t matter who we vote in – we’re screwed. Neither party can stop the decline we’re facing. Our only hope is others default before we do to make it less catastrophic, and we should see Greece, Spain, Italy, Portugal and Ireland go before we do.
    You may as well vote in Mickey Mouse for all the difference it makes.
    The worlds biggest customer (US) has run out of credit with the worlds biggest producer (China) preventing them investing themselves.
    There is no demand left in the world – both Tory and Labour are lying when they say they can fix it. It’s only a matter of time….

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