The true meaning of Osborne's Budget
Fraser Nelson 10:34am
To understand the budget properly, read James Forsyth's cover story in The Spectator today. Sure, it was about reducing the deficit - but within it lie
several political strategies which explain how George Osborne hopes to win a majority Conservative government. James says that those around Cameron will not entertain this notion - they "have
been persuading themselves that coalition government is the best possible result". But Osborne, he says, finds it deeply unsatisfactory and has a twin mission: fix the economy, and win
outright next time.
How? The move on tax credits, James says, is a classic example."He has been observing recently that Gordon Brown spent 13 years successfully creating Labour voters — mainly through state dependency — and that the Tories need to reverse this process if they are to win. It would also mean fostering a new set of Tory voters in the way that Margaret Thatcher did with council house sales and the ‘Tell Sid’ expansion of share ownership. This is the strategy that underpins Osborne’s first Budget."
And Osborne's decision not to cut capital spending budgets also has a political implication."During the election campaign, nearly every Tory candidate despaired at how so many families on £50,000 a year were voting Labour to protect their £545 child tax credit — despite the overall cost of a Labour government to them being far higher than that. Osborne’s Budget dealt with this directly. Within two years, no family earning £30,000 a year or more and with one child will receive tax credits. That class of wavering Labour voters, so irritatingly prevalent in marginal seats, will be no more."
The sculpting of a new Tory nation, James says, does not end there. Even in those Tory-resistant zones, Scotland and the north, Osborne has a prescription."This will have two effects. First, it means that spending on the infrastructure which business needs will continue — making Britain a more attractive place to invest and helping the private sector to grow. Second, the axe will now fall even more heavily on current spending in the public sector. This will lead to a significant shrinkage in the army of public sector workers, a group with whom the Tories failed to make much progress at the last election."
A while ago, James first revealed that Osborne wanted to work from No11 (as Lawson did) rather than the Treasury (as Lamont, Brown and Darling did) so they could knock down the walls and have one big Cameron-Osborne complex. This is how they had worked in Opposition: a pooled staff, and adjoining offices. "But coalition put paid to that. Each needed to work with their Lib Dem deputies. Mr Osborne is now in the Treasury, slowly developing his own centre of political gravity.""Both Scotland and the north of England have levels of state spending which exceed that of some Warsaw Pact countries in the Soviet era. Rather than try to build a new silicon valley, Mr Osborne is offering a tax break to anyone who sets up a new business in the most state-dependent regions of the country. The aim is to encourage enclaves of entrepreneurship, breeding Shirley Letwin’s ‘vigorous virtues’ and voters receptive to Tory messages"
It is always surprising, in politics, how the distances between offices has a real effect on the power dynamics. There is no underground passage that connects the Treasury to No10 - it's about a seven-minute walk outside, through security gates, past tourists etc and when Darling was Chancellor he mused how it was a relatively short journey but one you needed a bloody good reason to make. This distance, and the occupancy of two separate power bases, cannot help but de-Jedward Osborne and Cameron. James' piece is the best analysis I have read on the difference between the two.
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George Lees
June 24th, 2010 11:08am Report this commentI hope you are right that GO sees the imperative in scaling back the labour client state - looks (if you are a Conservative) like a no brainer to me. The problem is that GO was in charge of our election campaign that was a disaster. It had no focus and no popular Conservative tunes. In my opinion GO is a skilled tactitian but has no strategy.
DavidDP
June 24th, 2010 11:11am Report this commentPining for the psychodrama of Blair and Brown, eh?
TrevorsDen
June 24th, 2010 11:30am Report this commentits clear that removing state dependency is a good aim, both lib and tory. It is anti labour and they are both that.
But the rest of this is just a bit in la la land. Osborne is simply putting in place policies dictated by circumstance and which were agreed and accepted before the election.
nonny mouse
June 24th, 2010 11:35am Report this commentSurely this misses the most obvious move. Accelerating balancing the budget is about getting to the point where victory over the deficit can be declared and taxes cut before the 2015 election.
The risk in all this is growth. If exports or investment fail to take off or the hit from cuts is greater than expected growth will miss the targets and Osborne will have egg on his face.
Still, I'm guessing that the government have bank privatisation plans ready to fill in the gaps. Just imagine a new generation of 'Sids' created just before the election.
bohodotcom
June 24th, 2010 11:56am Report this commentOsborne is what Chancellor does
toni
June 24th, 2010 12:21pm Report this comment"To understand the budget properly"
Someone who understands the budget very well was the Chief Economist of the Nomura Research Institute of Japan Richard Koo, who on Newsnight last night said the budget was poorly timed and should not be cut when the private sector is deleveraging.
Imagine commentators here watched it from behind a cushion with fingers crossed if not in their ears though.
Tiberius
June 24th, 2010 12:37pm Report this commentAs much as I am looking forward to reading James' analysis, the preferable route to a Tory majority is to remove the generally recognized 7% bias against the Tories contained in the constituency boundaries, and simultaneously deal with the West Lothian question.
After all the Tories have won in England in the last two general elections.
oldtimer
June 24th, 2010 2:48pm Report this commentA budget billed as a budget to encourage savings, investment and exports failed to deliver on the first two - savings and investment.
For starters, everyone is going to pay more tax leaving less to save. Furthermore there were no measures to incentivise savings that I detected in his speech.
So far as investment is concerned, entrepreneurs will get 10% on their first £5 million gain instead of £2 million. Otherwise the higher rate tax payers, who in part fund these go getting entrepreneurs and who are the most likely buyers of the bank shares the chancellor wants to sell (when the time is right), face a 10% point increase in their CGT. This was not a smart move. The Chancellor would have increased his chances of encouraging more private risk investment if he had not put the cost of doing so up so sharply from 18% to 28%. John Redwood provided a perfectly sensible way of doing this with his taper scheme.
Dimoto
June 24th, 2010 2:58pm Report this commentToni - presumably Mr Koo thinks that we should follow Japan and build up a nice 200% of GDP debt Himalaya ?
Of course, the flaw with that, is that Japan is a nation of obsessive savers, and that we need to convince "international markets" that we are a safe borrower.
Mycroft
June 25th, 2010 10:14am Report this commentSo these prosperous people are voting Labour because they are worrried that the Conservatives will remove their child credit; so the Conservatives remove their child credit, and then they'll have no more reason to worry that the Conservatives will remove it. Our Osborne is evidently a subtle thinker.
frances
July 7th, 2010 11:52pm Report this commentthe trouble is this policy in isolation is a little bit too close to bonkers. as the reality is the client state has grown in other developed nations, not just here, and partly its increased size is a response to growing inequalities in income, and unless you deal with that youre going to create a lot of extremely angry people, not all dependent on the state. you conservatives may not be aware of this, but there are many people who are concerned about the lives of those who live in extreme poverty in this country.
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