Douglas Carswell

23 NOV 2016

Osborne - not Brexit - is to blame for borrowing

I'm interested to hear Philip Hammond's first Autumn Statement today. Hopefully, unlike his predecessor, he'll spare us political gimmicks and giveaways. But I'm curious to see if he will turn out to be any more fiscally responsible.

Even though the economic news since the referendum has defied Project Fear, pundits tell us that the Chancellor is set to warn of higher gilt yields, lower growth, and even more borrowing – and that Brexit is to blame.

Plus ça change.

Given how often Treasury and OBR forecasts have proved wildly inaccurate, you'd have to be pretty foolhardy to put much faith in them.

But if the public finances are in a perilous state, that didn't suddenly happen this year. It's down to the decisions made by the last Chancellor.

Prior to the 2010 election, George Osborne promised to eliminate the budget deficit by 2015. It didn't happen. Instead, during his tenure, he doubled the national debt. He transpired to be no different from Gordon Brown.

If Britain is unprepared for rising gilt yields, it's because we're still borrowing when we're meant to be running a surplus.

Relying on borrowing at record low rates forever was always a high risk strategy. Government bonds worldwide are a bubble - and all bubbles eventually burst.

This one needs to burst, too. Record-low bond yields – the result of record-low interest rates – have created a huge black hole in pension funds. It's a crisis, which can't be solved unless rates rise.

But, from the perspective of the public finances, we may once again be about to discover the costs of what George Osborne would call failing to fix the roof while the sun is shining.

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