James Forsyth

George Osborne interview: smaller government is not enough

The Chancellor on elected mayors, northern cities and the need for ‘a bit of the Michael Heseltine’

George Osborne interview: smaller government is not enough
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[/audioplayer]Puccini’s doesn’t seem like George Osborne’s sort of restaurant. It is a pizza-and-pasta place in the safely Labour constituency of Salford and Eccles, Greater Manchester, most notable for the fact that Sir Alex Ferguson once took his whole squad there. (‘Penne alla Giggs’ is still on offer to prove it.) In recent years, however, the Chancellor has become something of a regular — he has even taken the Prime Minister along — and is made welcome to the point that when we met there last Thursday diners queued to be photographed with him.

The Chancellor used to look awkward in such situations. But this time he looked relaxed, chatting away with whoever passed. It is all part of a carefully cultivated relationship. Greater Manchester is to blaze a trail for his idea of better, stronger local government, with more powers in exchange for more accountability in the form of a directly elected mayor. Osborne talks about a ‘northern powerhouse’ to drive the economy alongside London; other than the recovery, he says, it’s ‘the thing that I’m most passionate about and spending most energy on’.

If you could bring together Manchester, Leeds, Liverpool and Hull, he says, you would have ‘a critical mass of ten million people, equal in size and in economic potential to London’. ‘If you take the Central Line in London and you laid it across the Pennines it would be longer than the gap between Manchester and Leeds,’ he explains, his arm chopping the air in excitement. ‘But there are nothing like as many journeys between Manchester and Leeds as there are on the Central Line every day. These places — Liverpool, Manchester, Leeds, Hull — are not particularly far apart. But their transport links are pretty terrible.’

A northern conurbation bound together by better transport links would address what Osborne calls one of ‘the big weaknesses in the UK: too much of our success and strength in London and the south-east. We need strength and success elsewhere in our country, not by pulling London down but by building the rest of the country up.’

Stronger local government would help, too. ‘Far too much happens at the national level’ in England, the Chancellor declares. But running the Treasury, a famously centralising department, he isn’t going to devolve power willy-nilly. City councils will have to agree to create a combined authority and have an elected mayor to benefit. ‘If we are going to devolve really big budgets and big city-wide responsibilities of things like transport and policing and economic development and health and social care, then you need the accountability of an elected mayor.’

Do voters actually want that? Three years ago, ten cities held referendums on whether to begin electing mayors, including Manchester, Leeds and Wakefield — but only one, Bristol, said yes. Osborne is adamant that what he is offering now is not what the punters turned down. ‘We made a mistake in basically agreeing to a load of conditions imposed on us by our coalition partners,’ he says — that the mayors ‘had to be only in individual boroughs of cities rather than across the city area, that there weren’t going to be new powers. So it was not surprising that, with the exception of Bristol, we lost.’

Osborne is now negotiating directly with council leaders. He was in Manchester last week to sign an agreement devolving the £6 billion health and social care budget to the city’s councils. Mayors, he says, provide not just democratic accountability but are also ambassadors for cities. ‘I would love this to happen in other parts of the country like Leeds and Birmingham,’ he says. He’s also not bothered by the risk of the odd disastrous candidate being elected: ‘You get great mayors, you get lousy mayors. But that’s not a reason not to have mayors.’

Osborne is also keen on devolving powers over business rates, calling the current uniform system ‘a reaction to the problems of the 1980s’. ‘There were militant councils, most famously in places like Liverpool, and the national government at the time felt it could not just abandon cities like Liverpool and see every business in the city driven out. So, they stepped in. But I think we’ve moved on a lot.’

Devolution of taxes and the like ‘is not going to happen overnight’, he says, but he would like cities to have more responsibility for how they fund their services ‘in time’. Intriguingly, he cites the Scottish economy as evidence for the benefits of this. ‘On unemployment rates and the like it has performed really well. Only the south-east, eastern England and London have performed more strongly.’ But he is quick to add that ‘nationalism and long-term economic development don’t go hand in hand’.

There are several surprising aspects to what Osborne is trying to do. The first is the Treasury — a department known for hoarding power, with a low opinion of local government — backing devolution. I ask whether this is a product of austerity: does he just want someone else to do the cutting? Osborne vehemently denies this, saying that he’s devolving rising budgets for transport and health. But it is a striking coincidence that the Treasury’s conversion to localism has come in an era of retrenchment.

The second is that a Conservative chancellor is working with largely Labour-run councils. ‘The Conservative party absolutely must not allow itself to be shut out of parts of the north of England,’ Osborne says. He concedes that the Tories have ‘shied away, in the past, from talking about the gap between the north and south. We didn’t really want to engage with that question.’ That has to change, because ‘the Labour party talked about this north/south gap but made the gap a lot wider’, and because ‘you have to have an offer to all parts of the country, if you want to be a party of all parts of the country’.

Osborne doesn’t see anything unconservative about government trying to mastermind the revival of a city or a region. ‘The Conservative party is at its strongest when it’s not the party that says there is no role for government and the state should just get out of the way,’ he says. ‘That is not a strand of Conservative thinking that, by itself, is enough. You need to have a bit of the Michael Heseltine: “I’m going to take the Docklands and build a financial centre here and build an airport here.” Or, “I’m going to take the Albert Docks in Liverpool and put the Tate Gallery here.” That’s an important part of the Conservative argument.’

Osborne is, though, keen to stress that this isn’t all just a clever wheeze to menace Labour in its northern heartlands. ‘I’ve always thought that good politics follows from good economics and good policies. I didn’t start by saying I’d revive the Conservative party’s fortunes in the middle of central Manchester.’

So, if city mayors are such a good idea, surely Osborne must welcome the boost that would be given to the concept by one of their number returning to the Commons as prime minister? Osborne smiles and replies, ‘Who do you have in mind? Boris? Well, Boris is coming back, he’s going to be the MP for Uxbridge. But there is no vacancy for prime minister.’ If Osborne succeeds, the next ambitious and successful mayor to arrive on the national stage will speak with flatter vowels.

Budget Briefing 2015

On the day of the Budget announcement (18 March), join The Spectator’s Andrew Neil, Fraser Nelson and James Forsyth for a discussion on George Osborne’s last Budget before the general election. This event has been organised by The Spectator in association with Aberdeen Asset Management. For tickets and further information click here.