Which interest rate would you rather borrow at - 4% or 0.6%? It sounds like a moronic question. Not if you're the Chancellor, it's not. In launching pensioner bonds yesterday which pay 4% pa over three years, he is choosing to borrow at a much higher rate than the 0.6% charged by the gilt market.

This is costing the tax-payer money. If, as is likely, all of the £10bn bonds on offer are bought, the government will be paying almost £300m a year more in interest than it would if it borrowed in the gilt market*.

To put this in context, it is three times as much as the government is saving from the cap on benefits. And it is almost as much as it is saving from the bedroom tax.

In this sense, Osborne is redistrbuting wealth from the poor to the rich. According to the ONS (pdf), the typical household has only around £12,000 of financial assets. Only a wealthy minority, therefore, can afford to take full advantage of the £20,000 pensioner bond offer.

Pensioner bonds, though, aren't just regressive. They are anti-conservative, in three ways.

First, in paying more interest than necessary, Osborne is wasting the tax-payers' money.

Secondly, he is undermining monetary policy. He claims to be a "monetary activist". But one channel through which monetary policy works is that low interest rates are intended to force investors to buy riskier assets such as corporate bonds and equities, which reduces the cost of borrowing and hence raises capital spending. Osborne is (albeit partially) blocking this channel; paying high rates on government borrowing is a form of crowding out - about which Conservatives have long complained.

Thirdly, he is rejecting the concept of individual responsibility. Most older, wealthier pensioners voted for austerity. And a vote for austerity is a vote for low interest rates. In giving pensioners a higher rate, Osborne is protecting them from the consequences of their own actions.

What's going on here is simple. Osborne is channelling tax-payers' money to a favoured client group. There's a word for this - corruption. This is the sort of thing we expect in Uzbekistan or Nigeria, not a western democracy.

In saying this, I don't deny that pensioners are discomforted by low savings rates. But there's a simple solution to this that would benefit almost everyone - a looser fiscal policy.

* Assuming £5bn of the three year bonds are sold with an interest rate of 4% rather than the 0.6% gilt yield, the annual cost would be £170. And £5bn borrowed for one year at 2.8% rather than the 0.33% changed by the gilt market would cost another £123m.