Is George Osborne the first British Chancellor to hide good news in the small print? I
ask this in my
News of the World column (£)
today, and ask what he’s up to. Listening to Nick Clegg on Marr this morning, even he can’t quite say that the same forecasts that predict 500,000
public sector job losses also envisage three times as many jobs created in the private sector. Why so coy? I suspect because it would spoil the magic. That there is a deliberate gap between what
this government is saying and what it believes it is doing.
James Forsyth was the first to write (in his political column, now available
to non-subscribers) about ‘Gordon Osborne’, using
Brownite tactics. But whereas Brown hid the bad stuff, Osborne is hiding the good stuff. Brown was a bad magician: Osborne is more like Paul Daniels (with Danny Alexander as his Debbie McGee). This
is what I suspect he's up to...
1. The pledge
As we all know, every magic trick has three stages: the pledge, the turn, and the prestige. The last few months have been about the pledge:
that the economy about to suffer terrible cuts. Osborne let the media get into a lather about the worst cuts since Cromwell. The media didn’t pick up on the 1.5m job creation forecasts, as we
pointed out on Coffee House. But, more importantly, the Treasury
didn’t point it out either. Almost all journalists will include a balancing quote – so the “500,000 jobs to go” line could have been put into perspective at any time.
So Osborne has long had a chance – a pretty good one – to steer the media narrative. He announced the severity of the cuts in the budget, but the figure (a small one) was buried,
Brown-style, in the small print. At any point, he could have said “Let’s get this into perspective. The cuts are real, and will hurt, but we’re shaving total government spending
by 3.7 percent over four years”. (Ended up being 3.3 percent, as Osborne borrowed a bit more). This figure would, at any point, have put perspective into what became an auction of media
hysteria. Will Hutton, who is economically literate, declared in his column
last week that the
cuts were “fastest, deepest cuts in public spending ever mounted by a government in modern times.” It’s just garbage. But Hutton is well-connected: someone could have told him so.
If they wanted to.
It was in the June budget, not last week, that Osborne decided his fiscal consolidation would amount to 7.5 percent of GDP to 2015/16. At any point, they could have put this into international
perspective. Let’s take Hutton’s claim about it being the sharpest cut in modern times. In the Barometer column of this week’s Spectator – a treasure trove of useful
figures, and did I mention that you can subscribe
from £12? – we put this into perspective.
2. The turn – the secret 3-1 ratio
So let’s go back to that figure that George Osborne didn’t mention: 1.5 million jobs should be created while 500,000 are shed. For every job lost shed by government, three will be
created by the economy. This 3-1 ratio is the single most important aspect of the recovery plan - but it’s mentioned nowhere. The 3-1 figure is known only by Treasury civil servants, and
– like all the best secrets – by readers of The Spectator. And yet this is the backbone of the recovery strategy.
Why so quiet? Because this is the Osborne/Alexander magic trick. They brace us for the worst. But when unemployment falls, it looks like magic. This is what Paul Daniels would call ‘the
turn’. And is it magic? Of course not. Here’s something else you won’t read in the papers: in the fiscal consolidation of the Major years some 700,000 jobs were lost in the public
sector (way more, note, than we’re discussing now). But two million more jobs were created in the private sector (see graph below). The 3-1 ratio worked in Britain last time, and
there’s every chance it will do again. But Osborne, I suspect, doesn’t want us to know about this strong likelihood. It would spoil his wee trick. Ruin the surprise.
3. The prestige – the 2015 election
Major did exactly the same trick. And did the electorate like it? As Paul Daniels would say: not a lot. He screamed out his tactics the whole way. “If it isn’t hurting, it isn’t
working," and banged on about the "green shoots of recovery" so often that it became a cliché. Osborne was a political adviser in those days, and watched in horror. If you
want applause, it has to be a magic trick. Major was talking his audience through every manoeuvre - and his reward was what, in his memoirs, he referred to as a “voteless recovery”. You
can bet Osborne doesn’t want that.
As an American political fan, Osborne will know that Reagan won in 1984 based on the expectations gap: between the outlook in 1980, and the rosiness then (his address
announcing his intention to stand again, incidentally, is one of my favourite pieces of short political oratory). I suspect Osborne wants to
create a very big expectations gap. Hence his claim that, when he got to No11, things were worse than he thought. And hence his silence about what’s happening now. So the prestige will be
many more jobs – and rather than take a bow, David Cameron will call an election and Osborne will take a Tory majority. And send the lovely Danny McGee back to his Highland electorate to
explain where all those RAF bases have gone. Simples.
Now, tricks can go wrong. When Osborne was election co-ordinator, trying all his various clever tactics, and his magic trick was to make a 22-point opinion Tory poll lead vanish into thin air. He
can greatly enhance his tricks’ chances of success by articulating a growth strategy. His 50p tax and banker-bashing will serve to chase away the entrepreneurs who came to Britain under the
Major and Blair years: I genuinely believe he has not quantified the damage that this political posturing does.
But the cuts path is the right one, he has not flinched from it, and that 3-1 ratio should work out for him in the end. His whole trick collapses, of course, if those 1.5m new jobs are filled by
the economy sucking in even more overseas workers. But that’s another story.