One-nation economics

In his hastily scripted victory speech, David Cameron hit upon a mission that he wanted to define his remaining years in office. ‘I want my party, and I hope the government I would like to lead, to reclaim a mantle that we should never have lost: the mantle of one nation,’ he said. The problem was obvious: how could he reconcile this phrase with the hideous financial decisions that he had to make in office? With having to decimate not just unemployment benefits, but the support given to the millions trapped in low pay?

George Osborne started to give his answer with his Budget this week. His main decision was a to introduce a new ‘living wage’ of £7.20 an hour, rising to £9 an hour by 2020. This was treated with jubilation on Tory benches, but is not quite as generous as it sounds. The UK’s complicated tax credit system means that this will, in many cases, benefit the government more than it does the worker — some workers will keep as little as 15p in every extra pound of salary. The remaining 85p is lost in welfare withdrawal, and will go the Treasury’s coffers. But the Treasury certainly needs the money.

Osborne’s lamentably slow progress in reducing the deficit over the past five years has simply delayed the problems to the next five: he has spoken the language of austerity while increasing the national debt by 40 per cent. Greece, he said in his Budget speech, shows that ‘if the country is not in control of the borrowing, the borrowing takes control of the country’. Is he aware that Greeks now have their deficit down to 0.8 per cent of economic output? Britain’s deficit is six times higher, a shameful 4.8 per cent of GDP. But because we’re not in the euro, the Chancellor will get away with it.