The dangers of Osborne’s latest trick

Can George Osborne recover? Much depends on how the Chancellor confronts the twin crises he faces: the lack of economic growth (or any prospect of it) and his personal reputation for competence after his shambolic Budget. Today, we have alarming news. The Independent says that Osborne is offering ‘growth bonds’. These appear to be a debt concealment trick that even Gordon Brown didn’t think of. The Chancellor is looking at British savings accounts with envious eyes, it seems, and plans to ask people to lend money to his government if it promises to spend more on infrastructure. This makes little sense: right now, due to the bond bubble and QE, the British government is able to borrow at rock-bottom rates, as Osborne never tires of reminding us. Borrowing from the public would cost a lot more, so why do it? The reason seems to be that the Treasury thinks this type of borrowing would not show up on the national debt accounts, like PFI.