This is laughable, coming from Polly.
Cameron\’s plan for retrenchment is economically illiterate, and would be frighteningly dangerous if he were in power.
Economic illiteracy accustaions from Our Pol? However:
Take his plan for a loan guarantee to let banks lend again with the state as guarantor. It sounds good – indeed, the government has already said it will do the same, responding to the Crosby report. Cameron\’s deceit, in his eagerness to cut borrowing, is to pretend he can do it cost-free by raising interest rates enough to cover any losses from failed loans. Nonsense, say those working on the scheme. To make it self-financing, he would have to raise the loan interest rates to many times their present rate, and no one would want them. Guaranteeing loans, some of which would fail, costs some £2bn – but in Cameron\’s fantasy economics he pretends he can both fix this crisis and cut spending.
What\’s rather more sobering is that in this case she\’s actually correct. If the interest charged on loan guarantees is to cover the potential losses, then they would indeed have to be at market interest rates (market interest rates already encompassing those default risks). And the point is that no one\’s all that keen at borrowing at market interest rates, the deficiency this plan is designed to cure.
Whether it\’s a good plan to guarantee such debts is another thing entirely. But as she\’s described the plan, Dave really is being economically illiterate. Which doesn\’t really bode well, when Polly is more clued up than the Leader of the Opposition.