Anthony Hilton: Media swallow rhetoric on cuts

Bill Clinton, when he was President of the US, was quoted as saying that in his next life he would like to come back as the bond market - because it scares everybody.

Anthony Hilton
Anthony Hilton

It was a not-so-subtle recognition of one of the key facts of modern economic management - that expectations are more important than actions. In a world where capital can flow freely between countries, the major force influencing its direction is confidence.

The bond market is a daily barometer of that confidence because it reflects the willingness of those with money to lend it to the Government. It matters how the global fund managers who control these flows feel about a particular government because if they are optimistic and keen to buy bonds it reduces the cost of government borrowing, while if they sell then the cost of raising new loans will rise.

The judgements these people make are influenced as much by words and impressions as they are by actions.

The Chancellor George Osborne has understood this. He has cranked up the rhetoric about the immediate need for an austerity programme to cut government spending. By making comparisons with Greece, raising fears about a potential downgrade in the national credit rating, and by inflating estimates of the size of the structural deficit, he has sought to inflate the scale of the problem, to create the impression that he has no choice but to do something about it. Mrs Thatcher used to say 'there is no alternative' as a ploy to demoralise opponents and Osborne is using the same trick.

Now from his perspective, this is a reasonable strategy - the financiers love it, the opposition sounds feeble and voters are softened up. Osborne's strategy has been well thought through - but it is just a strategy.

The most depressing feature of the run-up to Wednesday's cuts announcement was the way the media swallowed the bait. Every trailer went on about the deepest cuts for a generation, and the print media were not much better. The days have gone when journalists waited for things to happen before commenting on them. Being first seems to matter more than being right.

Anthony Hilton is City commentator on London's Evening Standard

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