Former adviser to chancellor George Osborne, Tory MP Matthew Hancock, has made a massive error in his analysis of the American economy, writes Duncan Weldon.
Tory MP Matthew Hancock has made a massive error in his analysis of the American economy, writes Duncan Weldon
Tory MP and former George Osborne advisor Matthew Hancock has written a post for the Spectator’s Coffee House blog claiming that Labour are drawing the wrong lessons from America.
He accuses Ed Balls of getting “his figures wrong” on the US deficit plan and makes the bizarre claim that the US plan involves cutting faster than his own government’s plan. This is despite the IMF last week describing the UK plan as the “largest fiscal adjustment” of the major economies.
People who live in glass houses shouldn’t throw stones and Hancock himself makes a colossal factual error. His whole argument is underpinned by the notion that if countries do not quickly deal with their deficits then the bond markets will extract a high price. He uses the example of the downgrading of the US last week and claims that this has caused US interest rates to rise.
“The consequence? US interest rates have risen, just as they would do here if we were foolish enough to abandon our plan… The down-marking of US debt, and the reaction of US interest rates that followed, shows the gamble we would be taking if we abandoned our plan.”
The problem with this claim is that it is factually incorrect. US bond yields fell after the downgrade – something widely remarked on in the financial press and something he really ought to have checked before publishing the article.Like this article? Sign up to Left Foot Forward's weekday email for the latest progressive news and comment - and support campaigning journalism by making a donation today.