Is Osborne’s Budget the Future of Britain or Will His Bubble Burst?
Sunday Mail, July 12th 2015
For the last fortnight I have been sailing round the northern coast of Norway on holiday – perhaps an appropriate place to view George Osborne’s budget. He clearly thinks that he is on top of the world – the first Tory majority government budget since 1996, his seventh budget, and the second this year, the last only in March.
Osborne did many traditional Tory things – cutting inheritance tax and welfare, stole some of Labour’s clothes on a higher national minimum wage and non-doms, and even took from the Lib Dems in increasing tax-free personal allowances.
This audacious mix of political cross-dressing shows an increasing Tory confidence that they can remake the state, politics and Britain in their image. The Tories know they won the election, not because people necessarily agreed with them, but because of Labour weakness. For the last five years Labour has lost the economic debate, not knowing how to present its record in office, and ambivalent about its future offer.
This is, Osborne and Cameron believe, a huge opportunity, and where the Tory Chancellor’s mix of ideology and pragmatism comes in. There is the supposed ambition to’ rebalance’ the economy – between public/private, manufacturing/finance, North and South – but with the exception of the first, little sign of real progress in any of these.
There is a lot of rhetoric – ‘Northern Powerhouse’, ‘fairness’, ‘a new contract’ – to shape the debate. There are nods to compassion and inequality, with the national minimum wage rebranded a ‘living wage’, while the main task is dismantling Brown’s complex system of working and child tax credits, and beyond that, the principles of the Beveridge welfare state.
‘Welfare’ has become in recent decades a term of abuse and even more, of caricature; Osborne’s rhetoric of ‘strivers, not shirkers’ capturing the intolerance and incomprehension of part of ‘middle Britain’ for the society they live in. Yet, even here Tory dogma is about moving the debate slowly more rightwards, and picking off vulnerable groups, while leaving pensioner benefits untouched.
This is cold politics and bad economics. Young voters generally don’t vote (43% turnout last election) and even less that do vote, vote Tory. This allows the continued Tory assault on young people’s benefits to continue.
How far British politics has moved rightward was seen in David Dimbleby’s reference, on BBC ‘Question Time’, to student grants as ‘a gift’ and not to be corrected by anyone on the panel, or the audience. The UK state used to see it as it natural to support higher education students; it doesn’t now in England, but still does in Scotland.
Older voters do vote in huge numbers (78% at the last election), are rising in number due to demographics, and nearly half vote Tory. This is the logic of things like inheritance tax changes, the basic state pension rising 16% in real terms since 2010, and the council tax freeze – a logic not lost on Scottish politicians.
Yet on many of the big issues facing the UK economy Osborne had little to say, or just went through the motions. The UK productivity gap which means German and French workers continually outperform UK firms was left untackled. Similarly, skills, innovation and universities, Britain’s under-invested transport infrastructure and the housing shortage, were all just given passing mention.
There is a shocking Tory belief that the public realm – the BBC, NHS and welfare state, can be remade in the name of ‘a low tax, lower welfare’ society. Problems such as greater poverty or child hardship can be simply solved by redefining them and changing the terms of debate.
This leaves Labour with a lot of questions. Many may not trust the Tories or Osborne, but Labour know that if it is to win another election it cannot do it just as the party of welfare, the poor or anti-austerity. It has to square these circles, try to win back Scotland against the odds, and answer whether Ed Miliband’s Labour wasn’t sufficiently ‘pro-business’ or not?
Osborne’s politics are a mixture of ideology, electoral calculation and optimism that the economic cycle of growth will continue. It does offer for all its faults a Tory vision of a future Britain. And it leaves Labour even more than it did pre-Budget struggling for a coherent message – of its own past, present and future.
It looks shrewd, but Osborne’s ambition has echoes of Gordon Brown in arrogance and over-reach. Perhaps, like Brown, pre-crash, in an age of turbulence and uncertainty, the only way for Osborne is down, with shares in him already over-valued. If Britain has an asset bubble in property and shares, it also has an Osborne bubble that one day will burst.
Osborne has, like Brown, proven an adept, politically successful Chancellor, who has also been an economic failure. Britain is no nearer answering its many economic challenges, but Osborne and the Tories have succeeded for now in changing the mood music. At the moment, the Osborne fantasyland version of Britain has no real challengers.