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In a time of shrinking budgets and austerity, David Blunkett advocates... microfinance. But why?

Our diarist notes the former Home Secretary retains a sense of irony

A scheme originally devised to help Bangladeshi peasants escape from poverty could be put to use reducing the number of unemployed in the UK, the former Home Secretary David Blunkett reckons. Microfinance makes small, low-interest loans available to people who are too poor to provide the kind of collateral that banks require, to help them set up businesses.

It was pioneered in Bangladesh by the Nobel Peace Prize winner Muhammad Yunus and spread across the world, attracting rave reviews as the key to giving the poor what Tony Blair used to call “a hand up, not a handout”.

Then around 2010, it hit a wall of scepticism, as questions were asked about the kind of people getting these loans. Only this week, the Massachusetts-based National Bureau of Economic Research reported that a sudden rise in child labour in Bosnia had a lot to do with the availability of microloans. Last year, the UK Government sponsored a comprehensive review of the somewhat scanty evidence. The conclusion, published in August, was that “it remains unclear under what circumstances, and for whom, microfinance has been and could be of real, rather than imagined, benefit to poor people”.

But Blunkett is still a believer. He argues that microfinance is an economic way to get people off welfare and into self-employment. “Yes, a lot of it would be fairly menial and basic work; but if people need ironing doing, meals preparing and delivering, basic repair and gardening work, then why not?” he argues. His essay goes on line at 10am today on Labour’s Policy Portal.

Can Clegg brush off three small deposits?

Four years ago, a Labour candidate came a humiliating fifth in a by-election in Boris Johnson’s old bailiwick, Henley-on-Thames. In Nick Clegg’s view, the lesson was clear. “After one year in the job Gordon Brown cannot even get enough support to save his deposit!’’ he said. “Labour’s days are well and truly over.”

After two years in the job, Nick Clegg was unable to get enough support to save two of the three Lib Dem deposits in Thursday’s by-elections, nor even to beat the Reverend Simon Copley of the Herringthorpe United Reformed Church, standing as an independent, in the race for seventh place in the Rotherham by election.

Tatchell’s spectacular loss marked with a win

Monday will mark the 30th anniversary of the day when Peter Tatchell was suddenly propelled to national fame, after the then Labour leader, Michael Foot, vouchsafed that Tatchell would never be Labour’s candidate in an impending south London by-election. Tatchell went on to be Labour candidate in the Bermondsey by election, but was persuaded to draw a veil of silence over his sexuality, which managed  to convert what should have been an irrelevance into a dirty, open secret, and Labour lost in a campaign with nasty homophobic overtones. For years afterwards, it was assumed that the wisest course for any party hoping to win a parliamentary by-election was to put up a married heterosexual. This week, Steve Reed, who is openly gay, held Croydon North for Labour with almost 65 per cent of votes cast. He was the first.

Johnsons keeping up with the Johnsons

I see that Rachel Johnson, the editor-in-chief of The Lady, and Leo Johnson, of PricewaterhouseCoopers, have made it into the latest edition of Who’s Who. They are siblings of Boris Johnson and Joe Johnson MP, and children of Stanley Johnson, who already have Who’s Who entries. Five Johnsons in one tome – spare us any more!