Has the Financial Times just been sold another pup? Its economics editor Chris Giles (who predicted that the Brexit vote would lead to recession) has written what could be a Labour Party press release today. He reports as fact a claim by the NIESR, a left-leaning economics think tank, that Rishi Sunak could have saved £11 billion had he taken their advice and taken out insurance against rising interest rates.
A startling claim, interesting hypothetical and worthy of a report. It might fall down upon further scrutiny: could the Treasury really ordered the Bank of England to force commercial banks to swap reserves for gilts? Would this not have been a massive gamble that could easily have lost money? But the FT, in its excitement, decided to write up the NIESR’s what-if as an expose – as if the money has actually been lost and they were revealing this to the world. This rather weird, highly hypothetical study was made into a splash.
Failure to insure leads to theoretical, rather than actual, losses, but the FT forgot this in its excitement. Nor is there any note of scepticism. By paragraph three, Giles is in full spin mode, talking as if the lost money was real.
‘The loss to taxpayers is greater than the amount Conservatives have accused former Labour chancellor and prime minister Gordon Brown of costing the UK between 2003 and 2010, when he sold some of the nation’s gold reserves at rock bottom prices.’
Of course Brown personally ordered the sale of the gold, a disastrous foray into asset management. And the ‘blunder’ to which the FT refers is a decision not taken.
Furthermore, plenty of the proposals laid out by the NIESR would interfere with Bank of England’s independence, so why lay the blame on Sunak’s door? A newspaper like the FT is supposed to know where such decisions are taken: why muddy the water and take its readers for fools? As one said: “This article is very difficult to read as it mixes up the Treasury’s position and the BOE’s position.”
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