Osborne says Brown’s economic reputation “in tatters”
George Osborne launched a scathing attack on the government’s economic record this morning claiming Gordon Brown’s economic reputation was “in tatters” while promising the Conservatives could restore stability.
Labour rejected his claims, however, with chief secretary to the Treasury Yvette Cooper condemning the Tories’ lack of policies and “empty promises”.
In a speech to think tank The Policy Exchange, the shadow chancellor said the immediate priority for the government must be to ease the credit crunch and reopen the market in mortgage backed securities.
He said that while the Tories supported the actions taken so far by the Bank of England there was “clearly scope to go further”.
Osborne called for a broader collateral swap programme supported by the Treasury arguing this would allow banks to swap their illiquid mortgage backed securities for liquid government bonds. At present the Bank of England will only allow banks to offer their A-rated mortgages – those which carry the least risk – as security against loans, which they say is stifling their ability to restart the mortgage market.
But he added: “Such a significant step would have to be accompanied by cast iron guarantees for the taxpayer, and that must be priced into the deal – not least to minimise moral hazard. And of course any intervention must not exacerbate inflationary pressures in the longer term.”
He said this was something the government could do immediately and should be discussed at tomorrow’s banking summit.
He also called for longer term reforms and he said the position of the head of the Bank of England should be strengthened by giving the governor a single, longer non-renewable term.
He added: “It is not helpful to have the prime minister playing games with the reappointment of the head of the central bank in the middle of a financial crisis, as we saw earlier this year.”
And he called for tighter rules regarding the level of capital banks must hold to remain solvent arguing the level of capital should increase and that banks should be stopped from hiding liabilities off their balance sheets.
Osborne said the Conservatives would reform the fiscal rules so that they are independently verified meaning a Tory chancellor would not be able to judge his own performance against his own rules.
And he said future governments should not be able to borrow recklessly in a boom as he claimed Labour had done while in power.
He also promised a Tory government would “improve competitiveness through dynamic supply side reform”.
“Lower taxes are part of the answer and our pursuit of sound money will make that possible. But we will not disappoint people with undeliverable promises.”
He also repeated the Tories’ commitment to abolish stamp duty for nine out of ten first time buyers while also raising inheritance tax to £1 million.
Labour responded to the speech by saying the Tories’ only economic policy was “billions of pounds of unfunded tax promises”.
She pointed out the International Monetary Fund (IMF) had said the UK economy would be one of the fastest in the world this year and that this reflected it being “better placed” to weather the current unstable global financial climate.
“While the Labour government is working with international partners to take the serious decisions to help homebuyers and families and respond to international financial instability, all the Tories can offer is empty promises and short term opportunism,” she added.
Public opinion appears to be turning against Ms Cooper’s party, however. A Financial Times/Harris poll said 68 per cent of respondents were “not confident at all” in the government’s ability to deal with an economic crisis.
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