Conservative conference: chancellor's credit-easing plan
- 4 October 2011
- From the section UK Politics
Journalistic inquiry here in Manchester since Chancellor George Osborne finished his speech has concentrated on trying to find out more about his plans for credit easing (or monetary activism as the Treasury also calls it).
You can see my efforts to learn more from Treasury Minister Justine Greening here.
Since that interview I've learned that the Treasury would only buy the corporate bonds of big companies in another financial crisis (at the moment big companies are flush with cash and don't need state help on borrowing) and that the real breakthrough would come from developing a corporate bond market for small and medium sized companies (the SME sector).
The Treasury would encourage SMEs to issue bonds (as an alternative to scarce bank loans) by promising to but them up itself with borrowed money. It would not buy the bonds of companies deemed not creditworthy.
The bonds would have to be approved by credit rating agencies (that really worked with sub-prime!). The scheme would probably not touch the very small (where credit is scarcest).
The bonds would probably be aggregated into new financial instruments to give scale to this new bond market (let us hope they are not then sliced and diced, like sub-prime).
And it won't happen overnight: Treasury briefings talk of months if not years to establish this SME bond market, so the plan doesn't amount to an immediate monetary stimulus.
The Treasury would have to borrow the money to but these bonds but they would appear as assets on the government balance sheet so (it is claimed) not add to government borrowing (I'd like clarification on that: if I borrow £500,000 to but a house secured by the house I've still added £500,000 to my borrowings).
Concentration on this however has obscured another interesting part of the Chancellor's Speech.
At the Lib Dem conference Energy Secretary Chris Huhne denied to me in a BBC interview (and then to the conference) that the various green measures of which he is an enthusiast was helping drive up energy bills.
Indeed he claimed that his various energy-saving measures would actually cut bills over time. That is clearly not the Chancellor's view.
More realistic targets
Mr Osborne acknowledged that green policies were "piling costs on the energy bills of households and companies". He went on to say that Britain should not be cutting carbon emissions any faster than the rest of the EU. At the moment we are trying to meet tougher targets than any other major European economy.
The Chancellor said he'd made it clear that the current energy review should reign in Britain's position as a green outlier.
I didn't get the impression at the Lib Dem conference that Mr Huhne's heart was in that. He seemed quite proud of the idea of Britain leading the green field.
I know from private briefings that the Chancellor does not quite share Mr Huhne's green enthusiasm. Mr Osborne wants more realistic targets. Mr Huhne wants to be a pathfinder. Who will win? Watch this space.
* The Andrew Neil Interview with Andrew Lansley is on BBC iPlayer. (until Sunday).