It’s wonderful what you can do with the public finances if you really try. Just now George Osborne, the resourceful Chancellor, is having to try harder. The obvious ways to improve them — by raising more money in taxes, or by spending less — are necessarily unpopular, as he is being reminded on all sides. The cry goes up: hands off our tax credits, almost as sacred as the National Health Service. Think of something else.
So he now has his eye on those big benevolent landlords, the housing associations. They may be autonomous charities, but over the years they have received many billions in government grants. Perhaps these grants could somehow be sold off? For his next trick, he might even take Network Rail off the Treasury’s back. A new official study of this incontinent borrower’s shape and financing has helpfully suggested that everything is possible — though its former shareholders, who knew it as Railtrack, were so thoroughly bitten that they may well be twice shy.
Still up the Chancellor’s magical sleeve must be the neatest trick of all. One quarter of the National Debt is owed to a nationalised industry: the Bank of England, no less, which bought truckloads of government stock when it was engaged in “quantitative easing”. This is, in all but name, money that the state owes to itself and could simply be crossed off its books. This idea (aired in these pages last May) has commended itself to a former Chancellor, Lord Lawson of Blaby, but not to the Bank’s Governor, Mark Carney, who resisted it. Today’s Chancellor might nudge him or seek to convert him. Or, more simply, he might suggest that the Bank should do some more easing. The government’s principal creditor would back its truck up to the Treasury and collect another load of stock.
This would certainly be consistent with the Governor’s latest round of guidance, which extended the prospect of low inflation and rock-bottom interest rates. At such a time, a little more easing might even be helpful — and if the prospect changed and inflation showed signs of resurgence, the Bank’s stated preference would be to lift interest rates off the floor. No question of “quantitative tightening” — those trucks would remain in the garage. To a Chancellor in need of a new trick, this must look more attractive than tangling with the landlords or re-railing the Network. Certainly it would be simpler and quicker. Keep an eye on his sleeve.