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.”
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22 Responses to “Osborne calls for “honest debate” while manipulating the facts”
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)
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.
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..)
Climategate Videos and… Eco-Green ignorance in Greece « OMADEON
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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.