But this latest budget he finds a bit cruel. It’s a contextual thing, taking from the disabled to help people selling off second homes looks, I don’t know … biased? What has been so enjoyable about this weekend is watching the effect of IDS’s (In Deep Shit his mates call him) flesh wound on George Osborne. What a bleed out.
Osborne, the arch-strategist whose dream is to lock in the Tory vote for generations, has looked more and more detached lately. This is why he is everywhere in a hard hat and hi-vis jacket. These are the signifiers of growth, a growth that is not happening. He is playing dress up. The public instinctively know this.
His “skivers” rhetoric does not work so well when applied to people with MS, just as Jeremy Hunt’s demonising of junior doctors as money-grabbing militants does not tally with people’s actual experience. We go to hospitals. We see who works hard. Hunt and IDS are loathed and they use faith bizarrely as a counter to compassion instead of its partner. Duncan Smith’s universal credit has been unworkable and unravelling for some time. His conscience has been pricked by this failure as much as anything else.
Where, I wonder, does this leave the creed of Cameronism itself? For a while it has seemed little more than an extension of Thatcherism with some gay rights thrown in. This is we are told is “compassionate conservatism”. I once followed William Hague around America (a young Osborne was there too) as he was learning compassionate conservatism from people like George Bush and Henry Kissinger. One of its key tenets is decentralisation from the state alongside the idea that only markets can generate wealth and freedom.
Yet this is not what Osborne has done at all. He is centralising power like crazy. Why is he interfering in school days, taking power away from local authorities, ending parent governors? This is a power grab and increasingly it exposes the end of any compassion that may have existed within the party leadership. Austerity no longer makes sense even in terms of his own logic. This is an ideology of callousness. And it is brazen.
Cruelty as George Eliot said requires no motive outside itself. “It only requires opportunity.” This is the legacy of Cameron.
So I don’t buy IDS as the tin man who has finally found a heart – yet somehow the curtain has been pulled back on the Wizard Oz-borne. An illusionist whose tricks are hollow. Cameronism is equally exposed as a belief system with no vision beyond keeping the show on the road. We may indeed be back in Kansas.
Perhaps it’s unwise to admit it, but one of the challenges during a budget speech is to stop your mind from wandering. Even an address of astonishing political audacity – as George Osborne’s was – has its longueurs, its moments when the stats are coming in such a blizzard, the borrowing projections merging with the annual growth percentages, that the brain, briefly blinded, looks elsewhere.
On Wednesday, mine wandered to Philadelphia. Not the city itself, but rather the Republican national convention held there in 2000. They gathered to anoint George W Bush as their nominee and laid on a spectacle that had one striking feature. Though only 4% of the delegates in the hall were black, one headline speaker after another was either African-American or from some other identifiable minority.
Primetime slots were given to Colin Powell and Condoleezza Rice, obviously, but the three co-chairs also happened to be a black Oklahoman, a Latino Texan and a white single mother. They found room for a gay congressman, while music came from Harold Melvin and Chaka Khan (African-American) with a cameo from Jon Secada (Cuban).
The whole effect was so brazen, it was almost comic. (One reporter likened the extravaganza to the Black and White Minstrel Show.) But the political logic was clear. The Republicans didn’t expect huge swaths of black American voters to end their historic allegiance to the Democrats and join them. They knew their prospects among Latino and gay Americans were limited. But those groups were not the target audience.
What Bush wanted to do was reassure white, suburban, swing, or floating, voters – especially women – that the Republicans had lost their harsh edge. That they were no longer so mean-spirited that a vote for them made you a bad person. The diverse faces on show at Philadelphia were there to salve the consciences of white soccer moms hesitating before backing Bush.
Which might explain why the memory of it returned on Wednesday. For a similar dynamic was at work. Who was Osborne appealing to with his announcement of a “national living wage”? He knows that precious few of Britain’s lowest-paid workers are set to rally to the Tory banner any time soon.
No, the voters Osborne wanted to reach are those for whom the Conservative brand is still tainted, those who may be doing quite well themselves, but who still associate the Tories with selfishness and even a callous disregard for the poor. Osborne was making a long-term bid for those votes. He knows they already trust him to have a cool head. Now he wants them to believe he has a warm heart.
This calculus is not new. It underpinned the modernisation project on which Osborne and David Cameron embarked a decade ago. When 2005-era Cameron spoke of “compassionate Conservatism” it was not the poor he was wooing. He wanted the votes of those who care about the poor, or more accurately those who don’t like to think they’re the sort of person who doesn’t care.
If that sounds cynical, that’s only partly because – to quote the Resolution Foundation, the group name-checked by Osborne when he announced the policy – the “national living wage” is a misnomer. Now that tax credits are to be taken away, you couldn’t actually live on it. It’s simply a welcome boost to, and relabelling of, the regular minimum wage. With unassailable chutzpah, Osborne has co-opted a halo brand that is not his – the living wage – in the hope that some of its glow will shine on him.
There is a deeper reason for scepticism. Osborne’s generosity was very carefully rationed. His judgment on who should be helped was not based not so much on need as political value. At its most obvious, there was the now-familiar bias against the young, who don’t vote, in favour of the old, who do. But this is about more than just voting blocs. Running through the chancellor’s decisions was a judgment about who the public will deem deserving and who undeserving.
Privately, the prime minister says pensioners have to be protected because they cannot change their circumstances. Which implies that the 20-year-old who will continue to work on the existing, miserly minimum wage, and is soon to be denied housing benefit and the possibility of a maintenance grant for study, is master of all he surveys, and only in his current situation because he has chosen not to change it.
It’s not important whether Cameron or Osborne truly believe this. What matters is their assumption that the voters believe it. They are gambling that Britons have empathy for pensioners and underpaid over-25s, but little for the young, for those on incapacity benefit, or on a low income with more than two children and for those who work in the public sector – all of whom were hit hard by the budget.
The cynical person here is Osborne himself. He is making a judgment about the limits of sympathy the majority of the electorate have for those falling behind. He has seen the shift in public mores, from the Cathy Come Home era of half a century ago to the Benefits Street culture of today, in which the poor are just as likely to induce anger as compassion.
And what compassion there is, Osborne has learned not to take too seriously. He doubtless remembers those 80s opinion polls which for years showed Britons insisting they regarded mass unemployment – the issue then championed by Labour – as the prime challenge facing the country, only for those same voters to re-elect Margaret Thatcher again and again.
Osborne has surely concluded that you need to do just enough to show you care – and then you can get away with plenty. Witness the inheritance tax giveaway that will take nearly £1bn a year out of the public purse by 2020 and which hands the children of those with assets a big slab of untaxed, unearned income.
In the supermarket trolley of Osborne’s budget were stashed a variety of such luxury treats, but he concealed them by putting a conspicuously organic, free range item – his “living wage” plan – on top.
Labour should be watching and learning. It would be a mistake to conclude the British public is uncaring. But nor can Labour make its pitch to the electorate on empathy alone. Voting is not an act of charity, but of self-interest – even if that self-interest includes the kind of society you want to live in. Voters want to know they can trust you to run the economy – and if you can be kind to the less fortunate, the deserving ones at least, then that’s a very pleasant bonus. But it’s that way around – and George Osborne knows it.
George Osborne styled Britain as the “comeback country” in Wednesday’s budget. Yet the carefully crafted narrative, in which he plays the sombre statesman stewarding the economy back to calmer waters, barely disguises the nakedly political nature of many of his decisions — and the serious risks that remain.
First, Osborne has only been able to cut debt as a share of GDP this year – hitting a target he was expected to miss as recently as December – and promise to call a halt to austerity before the end of the next parliament, as a result of a two-stage act of political conjuring.
Instead of the five-year austerity drive he pencilled in as recently as December, he has now set public spending on what the independent Office for Budget Responsibility (OBR) called a “rollercoaster”.
The Treasury will now swing the axe more sharply than previously planned in 2016-17 and 2017-18, before switching back to deliver what the OBR calls “the biggest increase in real spending for a decade in 2019-20”.
It’s a boom-bust spending pattern for public services no Whitehall mandarin would deliberately plan — but it will help Osborne to ward off the accusation that he is on an ideological crusade to shrink the size of the state.
Second, the chancellor is counting on the proceeds of a pair of banking privatisations. He has announced plans to sell off a mountain of mortgages the government has owned since the bank bailouts, and a fresh batch of Lloyds Bank shares.
The handy £20bn proceeds – which, conveniently, he plans to pocket by the end of 2015 – will make no difference to the size of the public debt in the long term, because the state is losing out on the mortgage repayments and dividend income it would otherwise have received.
But critically, banking the income over the next 12 months allows the chancellor to fulfil his aim that debt would be falling as a share of GDP by 2015-16.
When it comes to the health of the economy, Osborne singled out international factors – not least the standoff between the combative Greek finance minister, Yanis Varoufakis, and his eurozone partners – as the key threats facing the economy.
Yet perhaps the largest question mark hanging over the future of Britain’s economy lies at home, in our woefully weak productivity record.
Rising productivity – the amount of output each worker produces – is the key to generating sustainable economic growth and higher living standards.
But while the UK economy has been creating jobs at the rate of more than 100,000 a quarter, allowing Osborne to claim that “Britain is working”, the fact is these workers are producing far less – and so being paid much less generously – than economists would predict.
In this latest set of forecasts, the OBR has scaled back its expectations for productivity growth; but it still expects a recovery to something like normal growth rates. And no one knows whether that will yet prove over-optimistic. As the OBR puts it: “Since it is difficult to explain the abrupt fall and persistent weakness of productivity in recent years, it is also hard to judge when or if productivity growth will return to its historical average”.
The balance of growth – between saving and consumption, imports and exports, debt-fuelled property speculation and sustainable long-term investment – is also far from what the chancellor hoped for. The OBR says the current account deficit for 2014 – probably the best measure of whether Britain can “pay its way in the world”, as Osborne likes to say – is likely to be at its highest level since the 1830s.
And two more inconvenient facts mar Osborne’s claim to have put Britain back on the road to recovery with the “long-term economic plan” that even the most disinterested voter must by now be bored of hearing about.
First, most of the modest upgrade to the Wednesday’s OBR forecasts for Britain’s long-term growth potential resulted not from the government’s economic management; not even from falling oil prices, which should boost consumers’ living standards and cut the cost of production for many businesses. Instead, it came from higher-than-expected inward migration, which boosts the size of the workforce.
“We now assume that net migration flows will tend towards 165,000 in the long term,” it says. That adds 0.6% to potential growth – the speed at which it can grow without stoking inflation – over the next five years.
Second, the recovery only really got off the ground in 2012, when the chancellor made a deliberate decision to ease off on the pace of austerity. We may finally have reached the sunlit uplands of the “comeback country”; but we might have got here sooner.
It is an incidental sentence, but it brought me up short. By 2018, general government consumption will be proportionally no larger than it was in 1948. So declared the Office for Budget Responsibility in its report accompanying the autumn statement. The work of three generations in building the sinews of a state that support systems of health, transport, education, environment, policing, science and the rest is to be summarily withdrawn over the next five years. It is a landmark moment in our national life.
Next year the coalition – deputy prime minister Nick Clegg supporting Cameron and Osborne – is aiming to legislate that the reduction of the deficit on this scale and speed should be a statutory obligation. Stunningly – apart from some allegedly effective new measures against tax avoidance, and asking non-residents to pay capital-gains tax on the sale of their homes – all of the work is to be done by cutting spending, by a cumulative £75bn in ways yet to be specified.
The IMF, after assessing the experience of 107 countries between 1980 and 2012, recommends that, after a credit-crunch deficit, there should be a balance between tax increases and spending reductions. In Osborne-land over the next five years more than 95% is to come from spending cuts – a global first in self-harm.
I worried in my column last week that the principal risk of the recovery – induced by Osborne actually introducing measures contrary to those he is supposed to believe in – was that his apparent economic success would seduce him into actively damaging prescriptions. So it has come to pass. The OBR shares my view that all we are witnessing is a cyclical snapback of the economy driven by a recovery of demand. This should not be the excuse to shrug off the calamity of irrational total austerity, and hack away at the state with abandon. But sure enough that is what is now promised. It is a deliberate challenge to the Labour party, but importantly also to the Liberal Democrats. I am not sure that, once the enormity of what is proposed is grasped by his party, Clegg will be able to persuade it to sign up to such a dark vision. He had to take the coalition agreement to a special conference of party members before he could formally agree to it. Already key figures aware of what is proposed, I’m led to believe, feel the whole party, as in May 2010, must be involved in another decision of parallel importance. I don’t think he can win any such vote. And what future would there be for the coalition – or indeed him – if it did come to that? Osborne’s calculation is that he and his party are on the right side of the argument. A jihad against government, backed by a rampant centre-right press, is capturing the popular mood. For alongside the proposal to create a 1948-scale state is another highly toxic proposal, at least for any Lib Dem worth their salt: to introduce a cap of just over £100bn on welfare spending, excluding pensions and the jobseeker’s allowance. Any last element of Beveridgean underpinning to the British approach of supporting the least well-off is to be removed. All there will be is a limited pot into which the needs of Britain’s disadvantaged will be shoe-horned. No Lib Dem can support this, surely.
The story is that this is all in support of “hard-working” people, as the Treasury declares on its webpage – bizarrely reducing a great state institution into a mouthpiece of Tory central office. The assumption is that the public and social institutions built up over the last 70 years are unnecessary and held in the same contempt by “hard-working” people as a highly ideological Tory party. It is a bet that only politicians insulated from the reality across Britain could make.
Some of the intense pressures on government departments are already surfacing. Leaked papers from the Department for Business show its cumulative spending cuts are at least £1.6bn, with more unspecified for 2018/19. Two proposals are privately under active consideration: one is to turn £350m of grants to students from less well-off households into loans, which I doubt will be cheered by their “hard-working” parents. The other is to cut the science budget. Indeed any ambition to lift research and development spending from its current 1.8% of GDP to the 3% benchmark spent by the world’s best can be abandoned. We are to stay in the second or even third division.
It will be the same across the board. From flood defences to class sizes, from the capabilities of our regulators to the effectiveness of our police, from assistance to the elderly or the scale of our performing arts – everything is under threat. And this is unrelieved by any attempt to look for tax revenue to mitigate the impact, as every other country does and is advised to do. Instead, more asset disposals are proposed. The east coast mainline, generating £209m of surplus on £700m turnover, will be sold despite its fabulous returns to the taxpayer. The same will take place with EuroStar. To give up such great financial returns along with the benefits of ownership is daft. The new owners will demand even higher returns on their investment, with only enfeebled regulators left to protect “hard-working” people from being skinned. Ownership matters.
As the IMF argues, the knock-on depressive effects of spending cuts on such a scale is much higher than a more balanced approach involving tax increases, especially when the banking system is still palpably weak. The next 18 months will see a clawback of some of the ground lost over the last six years. There could be a substantive follow-through for the rest of the decade. Instead growth will be much more subdued as the next wave of the jihad kicks in, all to create a 1948-scale state and a giant leap backwards to a 19th-century system of poverty relief. Is this the civilisation, and wider economy, in which “hard working” people want to live and work – and where so much risk is transferred from social institutions to the individual.
The autumn statement is a seminal event. The obligation is on the Labour party, and the Lib Dems, to make the counter case. Great politicians must have vision, and back it with argument and evidence. Miliband and his shadow cabinet must be brave enough to set out what kind of state and social settlement they want, and how best to lift the stagnating productivity of British workers, which is at the root of the “cost-of-living crisis”. Lib Dems need to ask themselves if they really want to be allies in creating the regressive, punitive civilisation Cameron and Osborne have in mind. Back to 1948? Or onward to something smarter, fairer and more generous? It’s decision time.
Much of modern politics is based on a series of confidence tricks. After Thursday’s “better than expected” (by 0.2 percentage points) growth figures, the mood around Westminster has changed. George Osborne claims the economy is “healing” and Tory MPs feel more convinced that, with a triple-dip recession avoided, the economy is on its way up. Only 0.4 percentage points the other way and it would have been a disaster. But Conservatives shouldn’t be so self-assured because, outside the Westminster bubble, they are much more unpopular than they realise or accept.
A few weeks ago, on the eve of the budget, a flurry of polls showed Labour had drawn level with the Conservatives on economic competence, and voters were losing faith in the chancellor. In another poll, people were more likely to reject an argument on the economy if Osborne advocated it.
This kind of unpopularity is extraordinary for a chancellor who has been in the job for less than three years. Most leftwingers think they know why (“they’re Tories”), but it’s curious that even conventional Westminster wisdom says Labour should be doing better on economic matters.
But there is no historical precedent for this; in fact Labour should be languishing way behind in the polls.
The key reason is that they were in power during the biggest economic crash of the past 80 years. Voters always blame the party in power for not preventing such big crashes, and take years to forget. The Conservatives were in power when Britain crashed out of the ERM in 1992, and it took the calamity of 2007 for them to be seen as better at managing the economy – a full 15 years later.
So why have people forgiven Labour so quickly? This question is more perplexing, as Labour has made two unpopular accusations against George Osborne since 2010: first that cuts to spending are too hard and too fast, and hit the poor hardest; secondly that austerity is hurting our economic growth and leading to stagnation. Neither of those arguments were popular for Labour to make.
Osborne has argued since 2009 that cuts need to be made to public spending to reduce Britain’s debts. Voters have not liked the cuts but a majority have always accepted their need. In fact more voters have consistently blamed Labour for the cuts than the coalition government. Voters have also mostly preferred more austerity over extra spending on growth. Similarly, on UK’s economic stagnation, most voters blame the previous Labour government, the Eurozone, banks or even higher oil prices for our mess.
If Labour are making arguments that voters don’t agree with, why aren’t more rejecting the party? Maybe the Tories are just feeling midterm blues? But this explanation does not make much sense either: Labour’s reputation for managing the economy increased after they were elected in 1997, and stayed high even during the midterm.
In other words, Labour has pushed ahead with unpopular (if true) arguments in the face of a very hostile media press. Plus, voters very clearly remember they were in charge when the economy crashed in 2007. And yet the Conservative record on economic competence is just barely ahead of Labour. It’s astounding that Labour aren’t languishing in obscurity in the polls.
This suggests to me that the issue here isn’t just the economy but something wider. The speed at which the Conservatives have become so unpopular says less about the cuts they’ve implemented and more about their overall brand. This is the practical impact of the failure of Cameron’s detoxification process, which died in the face of a weak leader unable to take on his own backbenchers. Westminster wisdom downplays Tory unpopularity to mask a hostility so deep that, as Ed Miliband cuttingly said at PMQs a few weeks ago, we were united when Osborne is booed at the Paralympics. It’s only a matter of time before the latest confidence trick also falls apart.