Osborne's almighty juggling act to get to the top

Written by Karim Palant on 26 October 2015 in Opinion
George Osborne must balance four priorities if he is to replace David Cameron. The tax credits row underlines just how difficult that job will be.

With the Tories triumphant and George Osborne a key architect of their success the chancellor has had a spring in his step since May.

He knows it is fifty years since anyone won the leadership of an incumbent party – and inherited Number Ten - without first serving as chancellor. And compared to Gordon Brown, the last chancellor to successfully play a similar hand, he has real advantages.

David Cameron’s tacit support, for one. Also, in 2007 the opposition were focused on electoral redemption whilst Labour is manifestly not. That will concentrate ambitious Tory minds: Osborne could wield patronage for at least a decade more.

So is it Osborne’s to lose? Politics is never that simple. Successful politicians must always balance priorities. The chancellor is setting out to juggle like never before to make it to the top.

First, he wants to deliver steady growth in the face of global headwinds whilst targeting the first surplus for fifteen years on or around the Tory leadership election.

Second he must secure Tory MPs support leadership and the support of a majority of Tory party members.

Third, must position the Tory party to win the 2020 General electon.

Fourth and most importantly he has a responsibility to the country to tackle the major economic challenges this country faces and to deliver long term, widespread prosperity.

These aims are far from aligned - as the tax credits row demonstrates.

The global economy poses a real challenge to the living standards of those without globally scarce skills. Tax credits are the best immediate term response. Attacking them is damaging to the UK economy and is inconsistent with any claim to be the party of working people.

But the chancellor bet his credibility on his surplus. The rationale for choosing to hit tax credits is clear if you examine the alternatives. An even higher minimum wage, cancelling cuts to inheritance tax or to income tax for the top fifteen per cent of earners all may make wider political and longer term economic sense. But they would push more Tory members and MPs into the arms of his rivals.

History shows that such political circles can often be squared but rarely in the best long term interests of the country.

Pumping up the housing market has been the escape route of choice for economically besieged Tory chancellors over decades, a habit that left Britain with chronic housing shortages and an economy deeply unbalanced.

Faced with political oblivion in the last parliament, Osborne reached for the same old tool box with Funding for Lending, Help to Buy and other wheezes. But whilst short term political fixes, photo ops and rhetoric can help with the politics they don’t solve the big long term challenges facing the country.  That is the dilemma the chancellor has so far struggled to solve.

So for all the hot air infrastructure investment has been cut for short term deficit targets. The new surplus rule makes that error permanent in return for a political dividing line. Keeping the backbenches happy stalled progress on Heathrow, on energy and renewables.

On immigration and Europe the chancellor knows where the national interest lies. But he cannot confront his Party and he prefers the dividing lines with Labour. And he has realised that it is one thing to talk about the revival of our northern cities but quite another to tell a Tory MP with a marginal seat they can’t have their dual carriageway because you’re focused on Merseyside or Teesside.

So, far from a Northern Powerhouse he offers the north disproportionate cuts and a business rates reform that hits areas facing economic disasters like Teesside’s this month hardest of all.

With the approaching spending review these competing pressures are about to go up several notches. The pressing need to play dividing line politics has dissipated but it seems he calculates that to maintaining credibility means sticking to a surplus timetable designed purely to put the opposition in a bind. 

That means 27% cuts to unprotected spending like social care, local government and Sure Start.  Even if he doesn’t have to fund backing off the tax credit cuts.

He thinks he can do this because he has spent five years weighing his own ambitions, political strategy and dividing lines against the long term national interest. Time and again he has made the same choice. And so far he has got away with it.

It looks therefore like he will press on even at long term cost to our economy, society and public services. And at the cost of many more tax credits-style rows. But this would be wrong-headed. Housing booms and commodity price slumps only come along so often. And he has had a very good frontman to play along with.

If he wants to achieve his personal ambitions he must heed Liz Kendall’s advice - “country comes first”.

Even whilst they agree with him that tough decisions are needed the public are under no illusions as to the chancellor’s motivations for such an extreme approach. They sense that for him the national interest is secondary. Hence their dim view of him personally.

The polls showing Jeremy Corbyn as the least popular new opposition leader ever also show Osborne is just as unpopular. Despite Labour being flat on its back, if he cannot turn that perception around Tory MPs might begin to wonder whether the heir really deserves the inheritance.

Even if he can convince them, Osborne should remember that a mistake Labour made when the Tories were out of the game was to assume that their voters had nowhere else to go.


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