Why has the Guardian gone so soft on George Osborne? Today’s paper is a fine example of the art of journalism as practiced to obscure rather than reveal. On the front page, we have this story headlined: George Osborne exploits fall in borrowing costs to boost growth
Now, that’s pretty much precisely what the chancellor would want on the front page, so it’s suspect in itself. But you might think there was another major UK economy story about. Something about the OECD estimating that we’re back in recession? Or you might even have heard another, something about the Treasury/OBR expecting much lower economic growth? Or that the OBR thinks things are so bad the deficit will rise despite the cuts? Strangely, none of these were considered worthy of front page treatment and were shoved back down the ticket to pages 6 and 2 respectively. Page 2 is of course the classic newspaper graveyard – people flip open the rag and immediately see Page 3, which is why what is on Page 3 is on Page 3 if you see what I mean.
The first number that appears on the front page is the figure of £21.5bn, which is apparently “lower borrowing costs” because gilt rates have fallen since last June. It’s not said anywhere how much this is relative to the total bill for debt service (£44bn), or to the government budget (£696bn), so it’s impossible for the reader to know if it’s a lot of money. It’s also completely mysterious whether this is annual, over a parliament, over a Comprehensive Spending Review planning cycle, or what. It is not said, but it is strongly implied, that this money is available now and will be used as an economic stimulus.
But the Chancellor isn’t doing that, and if it is a 5-year figure, the money isn’t available now. We only find out what’s going on over the page, buried on page 2, where we find out without much surprise that it is indeed a figure for the next 5 years, so 80% of it is promises, and anyway the annual figure of £5.3bn is 0.76% of government spending.
The piece moves on to recite a list of eye-catching initiatives – £380 million (woo, isn’t it a lot? Or a little?) by 2014-5 (does that mean rising to £380 million annually by 2015, or £380 million divided by five? They’re not saying, I’d take the short) for childcare (aww, babies), a “£300 million package of tax breaks for small businesses”, “a seed investment enterprise scheme” with no price tag, and – I am not making this up – £50 million for the Caledonian Sleeper.
I mean, it’s very cool and all – I took it in July 2005 to get out of town after terrorweek – but it’s hardly something that belongs in a front page economics story, is it? It’s an utterly trivial and vacuous eye-catching sunday-fer-monday initiative with a canny bit of marginal seat fan service in there too.
So, about that £300 million. Sounds like a lot of money! (After all, we have nothing to compare it with. Again.) You have to read on to page 7 and a story by an actual business desk reporter to find out that £210 million of it is a rates holiday for some small businesses that was sort-of going to end next October, that’s now going to end six months – six whole months! – later. To put it another way, it’s not new money and it’s a trivial amount and it doesn’t happen for a year yet.
Let’s adjust the £300 million – that’s more like £90 million, and we’re getting into Caledonian Sleeper levels of insignificance here. Experienced observers will guess that the unpriced “seed investment scheme” is probably included in the £90 million, thus getting twice the propaganda for the money, and they’d be right. Again, you’ve got to turn to page 7 for this, but not being the New York Times or the Craven Herald & Pioneer, there’s no way of telling that you need to. Government sources apparently think it’s worth £50 million. That leaves us with £40m to account for, and page 7 tells us that £50m is coming for “co-investment” from the “regional growth fund”. Well, the £10m difference can be accounted for by journos trying to add up. But it’s worth pointing out that the £1.5bn regional growth fund has been re-announced so many times you wouldn’t count on there being anything left in it.
And obviously, this doesn’t add up to anything like £21.5bn or even £5.3bn of stimulus.
So what’s going on here? It’s not as if the OECD or OBR stories weren’t running before the Guardian went to press. They’re right there in the paper! But by the time you read them, you’ll already have had your expectations anchors set by the front page, so you’re going to think things aren’t so bad. This is of course why the Treasury briefers gave the story to Nicholas Watt, Larry Elliott and Severin Carrell – to inject their own spin ahead of the news. In fact, Elliott is probably innocent, as he wrote both the real news stories, and the other two just quoted some of his work (chunks are identical).
Why Watt or Carrell, or the Guardian editor they answer to, still don’t either understand this or don’t mind is the real question.
Also, you’d have to read down to the bottom of Elliott’s piece on page 7 to learn that the Bank of England is apparently refusing to carry out the government’s policy even when it only involves the government’s money, rather than the central bank’s, and Osborne has cracked and given in.
The measures will augment the £20bn that the chancellor is announcing for so-called “credit easing” — money that will be channelled from existing promises that had been made by the Treasury to the Bank of England to enable Threadneedle Street to buy corporate bonds. The Bank has not purchased many corporate bonds and some of the £50bn of guarantees will now be used, instead, to help banks raise money more cheaply on the markets – and in turn reduce the price of loans to small businesses.
Will Hutton, co-author of a report on how to revive small business lending, said: “As it is structured, this won’t add £1 extra of new credit.” His report, written with academic Ken Peasnell, argues that the government would have been more effective if it had created a vehicle to buy up small business loans from banks, freeing up their balance sheets. Under the government’s scheme, the cost of loans to small businesses should fall by one percentage point, according to Treasury projections, although this may be less if the government does decide to levy a fee for the guarantee.
So, the £20bn – or is it £50bn? – “credit easing” just isn’t going to happen, because the Bank doesn’t want to do it and Osborne is too weak to sack Mervyn King and appoint someone who will, and too proud to resign and leave the job to someone with balls. Instead, the Treasury’s money (i.e. ours) will be used to buy bonds (probably government bonds) off the banks. We’re already doing this with money the Bank prints, which costs nothing, but this exercise is funded by government borrowing, which we have to pay back. Why isn’t this on the front page?