Oh dear. Green leader Zack Polanski may have enticed thousands more voters to join his party with his eco-populist rhetoric, but his grasp of economics leaves a lot to be desired. The party leader appeared on the BBC’s Laura Kuenssberg show on Sunday to discuss what the Greens would like to see in the Budget – and explain why the environmentalists are in favour of more borrowing. Only, er, Polanski’s point seemed more rooted in fantasy than the real world…
The Beeb’s veteran interviewer pointed out that debt in the UK is at the highest level it has been for years. ‘The financial markets are very sensitive to the decisions that the Chancellor makes,’ Kuenssberg added. ‘The UK’s already got huge levels of debt, so are you suggesting that actually you’d be related about the government borrowing much, much more?’ In response, Polanski first lauded comments by Labour’s Manchester mayor Andy Burnham, who suggested Britain should not be ‘in hock to the bond markets’ – a move that, er, alarmed the bond markets. Then the Green leader went on:
In terms of the borrowing, a lot of that borrowing is from the Bank of England. That’s money we owe to ourselves, it’s not borrowing or a debt in any real sense. Also it’s a lot of foreign countries who want to have that debt because actually that’s a good investment for them, because we have a relatively stable currency.
Er, not exactly, Zack. In fact, there are a number of errors in the party leader’s statement. Borrowing from the Bank of England is real debt – even if the bank is a public institution. The government still pays out on the bonds bought by the Bank of England and these still count towards public debt. Polanski’s claim about ‘foreign countries’ wanting to hold gilts is also misleading – given it is foreign banks and investment funds that want to invest for portfolio-related reasons, rather than ‘countries’ enthusiastic about UK government borrowing. And the note about ‘stable currency’ being an incentivising factor when a fund is looking to buy gilts fails to acknowledge far more relevant considerations, like interest rates and liquidity. Never mind the Green leader’s obsession with a wealth tax – his understanding of basic economics requires much more scrutiny.
For their part, a Green Party spokesperson noted that Polanski is in favour of reducing the Bank’s costs to the Treasury through tiered reserves – echoing similar calls by Paul Tucker, the former deputy governor of the Bank of England – and added:
Zack Polanski’s comment about the share of UK government debt being held by the Bank of England was entirely correct: close to 20 per cent of outstanding UK government debt is owned by the Bank of England as a result of the quantitative easing programmes since 2009. The Bank is a publicly-owned institution and so it is fair and accurate to describe this as ‘money we owe ourselves’. This doesn’t of course mean the debt is irrelevant.
Of course. But when did the Greens ever let the facts get in the way, eh?
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