As Osborne's enemies swoop, I can smell the whiff of retreat on tax credits

Written by Jon Craig on 21 October 2015 in Opinion
Many Tory MPs already loathe George Osborne with a passion. The current row plays right into the hands of his main leadership rival, Boris Johnson.

It's not as if George Osborne hasn't been warned.

Within hours of the vote at the end of the Opposition Day debate on tax credits, a normally super-loyal Tory MP told me the Chancellor has been urged by colleagues in Treasury meetings to help those hardest hit by his proposed cuts.

But so far, I was told, he won't budge. He might now.

It wasn't the numbers that mattered at the end of Labour's debate. The Government won the vote comfortably with a majority of 22. There were no Conservative MPs voting with Labour, though I'm told there were potentially five abstentions: Geoffrey Cox, David Davis, Jeremy Lefroy, Ian Liddell-Grainger and Stephen McPartland.

What mattered was the succession of Tory MPs who rose during the debate and called for some compassionate Conservatism and some changes to the tax credit cuts.

They ranged from a grandee of the Tory Right, Sir Edward Leigh, normally as dry as dust on the economy, to some of the newly-elected 2015 intake, not used to having to explain unpopular Government decisions to their constituents.

None of this group was more devastating than Heidi Allen, who has been in the Commons nearly six months and yet still hadn't made her maiden speech. MPs told me after her explosive speech that she'd previously told them she'd taken so long to make her maiden because she believed speeches in the Commons were "irrelevant". She appears to have changed her mind now.

"I can sit on my hands no longer," she told MPs, as she proceeded to accuse Osborne of "sending a message to the poorest and most vulnerable in our society that we don't care".

It's true she didn't sit on her hands. Bizarrely, after her onslaught she then trooped into the No lobby and voted against Labour's motion.

Another new Tory MP, ex-Army officer Johnny Mercer, pleaded: "I would urge the Chancellor for something, anything that might mitigate the harshest effects of this policy on our most vulnerable."

He will, Sir Edward Leigh believes. He told me in a Sky News interview after the vote the tax credits cuts are "bad politics" and he's convinced Osborne will announce some "tweaking" in his autumn statement on November 25.

Before then the Treasury has more battles to fight. First is a vote in the House of Lords on Monday 26 October which my Treasury source said the Government expects to lose. Then there's another Commons debate, probably later that week on Thursday 29 October, on a backbench motion proposed by Labour's welfare guru and ex-minister Frank Field with all party backing.

Field's Tory backers, predictably, include David Davis, but more significantly, Zac Goldsmith, Conservative candidate for London mayor. It's beginning to look very messy for the Government.

Apart from Davis, who it seems will back a rebellion against his 2005 Tory leadership rival David Cameron on any subject these days, the Tory critics who have called for a retreat on tax credits are not just the usual suspects. They also include Boris Johnson, who admittedly has his own reasons for stuffing Osborne, Andrew Mitchell and Lord Tebbit. I asked Boris, tongue in cheek, if he voted with the Government against Labour's tax credits motion. "Of course!" he said with a smirk.

So far No 10 and No 11 have chosen to manage this backlash with stubborn intransigence, a tactic that's always a blunder when common sense suggests you're going to have to back down in the end. It makes the inevitable retreat all the more humiliating.

Davis has claimed the tax credit cuts could be Cameron's poll tax. That suggests he too expects a climbdown. Over on the Labour benches, they won't say so publicly, but privately they're comparing Osborne's battle over tax credits to Gordon Brown's damaging 10p tax U-turn.

Osborne will have more than one opportunity for his own U-turn, besides his autumn statement. The effect of a Lords defeat next week will be to send the proposals back to the Commons for another vote.

According to my Treasury insider, the Government will struggle to win that vote, because many of the Tory back benchers who spoke out in the Opposition Day debate but couldn't bring themselves to vote for a Labour motion will be harder to persuade next time.

So, not yet six months after winning an overall Commons majority that George Osborne has admitted he didn't expect, the Tories have got themselves into what many in the party believe is an unnecessary war over an issue that doesn't do much for their claim to be the party of working people.

Supporters of the 2010-2015 Coalition would no doubt argue that the LibDems would have blocked these proposals.

The row isn't doing much for George Osborne's leadership ambitions, either. A few months ago, after masterminding the election victory and delivering what was regarded as a pretty successful Budget in July, he was the undisputed front runner. Not so undisputed now. This battle with his back benchers plays right into the hands of his main leadership rival, Boris Johnson.

Critics may dismiss "compassionate Conservatism" as just a slogan, but I was struck by the number of times I heard Tory MPs call for compassion during the tax credits debate.

I was also struck during the Tory conference in Manchester by just how many Conservative back benchers - and indeed some junior and middle ranking ministers - loathe Osborne with a passion. He may have plenty of friends, allies and supporters in the Commons, but he also has enemies who are determined to block his ascent to the top job.

Those enemies were using some pretty unparliamentary language about him in Manchester over his failure to help the steel industry. Then they were ridiculing his "Northern Powerhouse" initiative when thousands of steelworkers in the north of England are about to lose their jobs. Now they are attacking him on tax credits too. And some are actively backing Boris Johnson for Tory leader.

My Treasury informant tells me it has been suggested to the Chancellor privately that since it's claimed eight out of 10 people will not be worse off under the tax credit cuts, why not simply provide some help for the two out of 10 who are?

After nearly 34 years of Parliamentary reporting, I reckon I can smell it when the whiff of retreat is in the air. And I can smell it now.


Jon Craig is chief political correspondent at Sky News.

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