Tuesday, January 20, 2015

George Osborne buying votes in the UK

Via Simon Wren-Lewis, Richard Murphy informed me of a genuinely horrible policy in the UK. The Queen's exchequer is selling bonds at a discount to people over 65. As Chris Dillow explains, this gift is being given only to the at least moderately well off, since one must have financial wealth already to buy the special bonds. Wren-Lewis and Murphy have no doubt that this is a very blatant effort to buy votes in the upcoming election.

Murphy explains and denounces

here he [Chancellor George Osborne] is selling debt at 4% when he could quite easily sell it for less than half that price elsewhere. No one has done more to burden future generations than he is as a result. But the tune will not change, I am sure.

So why is he doing this? Candidly, it’s little better than gerrymandering. He’s literally selling the government’s silver to buy votes form the over 65s. Bribery is the nicest and politest possible term for his policy. I can't help focusing on one very odd thing Osborne said "Our long-term economic plan involves supporting savers. "

First he conflates a lump sum gift with an incentive scheme. At some times, there might be be good reason to encourage saving, but giving a surprise gift to those who have saved suggesting that it might happen again is a very inefficient incentive scheme. second, this is not one of those times. The UK has higher than NAIRU unemployment (now 6%) and 1.2 % inflation with interest rates at the zero lower bound. It could use more consumption not less. Osborne has found a way to add to the debt in the future (when debt will crowd out investment) and (he claims) encourage lower consumption in the present (when consumption won't crowd out investment). Finally, as a conservative, he identifies wealth with thrift. Savers differ from people who had equal income but spent more, but also from people who had much lower income and spent less. The conflation of wealth and thrift is deeply conservative. There is a lot of nonsense packed in that one short sentence.

Wren-Lewis is optimistic that Osborne has gone so far that the media will have to notice that he is a hypocrite. In fact, the giveaway was denounced by the conservative TaxPayers' Alliance

Campaigns director Andy Silvester said: "They're not only taxpayer-guaranteed investments for the already relatively well-off, but leave the government borrowing at above-market rates. "Too often during this Parliament it has seemed as if austerity stops at 65 - it's almost as if pensioners are more likely to vote."
I defer to Wren-Lewis's expertise and also guess he is totally right. Osborne had a reputation for severe integrity (he had the severe part down in any case). Now he has revealed himself to be a vote buying hypocrite. I imagine or at least fantasize that now that the mask has dropped, people won't be fooled again when Osborne puts it back on.

There is a pattern of assuming that austerians are honest. US reader(s) will recall the case of high praise of the integrity of the extremely dishonest Paul Ryan. Italian reader(s) will note that the austerian wonk Giulio Tremonti (who managed the Italian budget and economy while Burlusconi focused on staying out of jail and bunga bunga) is being investigated for allegedly taking a huge bribe (Italian politician's (alleged) dishonesty is, I admit, in a different league). I wonder if people might some day realize that enthusiasm for cutting government spending (especially anti poverty spending) is not proof of honesty.

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