Osborne's reputation continues to unravel

The "pasty tax" U-turn shows Osborne is now losing the politics as well as the economics.

Until recently, the received wisdom was that George Osborne was losing the economic battle (the economy has shrunk by 0.4 per cent since the Spending Review) but winning the political war. Labour's poll lead seemed fragile (remember Cameron's veto bounce?) and the Tories were still more trusted on the economy. Now, as the sudden U-turn on the "pasty tax" confirms, the politics have became problematic too.

The coalition's previous U-turns - on the forests sell-off, school milk, Bookstart, school sports, anonymity for rape suspects and NHS direct - were at least made from a position of relative strength. The government could plausibly argue that it was "listening" to public opinion and observe that U-turns are an occupational hazard of coalitions. But after the "omnishambles" precipitated by Osborne's Budget, the latest policy reversals (on the pasty tax, the caravan tax and secret courts) feel like a desperate (and likely worthless) attempt to regain public approval. They will also create an unrealistic hope among voters of U-turns on similarly controversial issues.

In the case of Osborne, we can expect the U-turns to provoke another series of jibes about "the part-time Chancellor" (Osborne is both Chancellor and the Tories' chief election strategist). Had he burned a little more midnight oil, rather than jetting off, less than a week before the Budget, to join David Cameron's US junket, some of the damage could have been prevented.

Yet Osborne's decision to cut the 50p tax rate (which polls showed even Tory voters supported) meant the Budget was always destined to be a political disaster. Voters always resent new taxes but Osborne's willingness to cut taxes for the 1 per cent meant their resentment was even greater. "We are not all in this together" was the conclusion they rightly drew.

As a result, the public are also now less willing to give Osborne the benefit of the doubt on deficit reduction and growth - the Chancellor's previous stronghold. A poll in today's Independent finds that seven out of 10 people want Osborne to adopt a "plan B" to give growth priority over cuts, while elsewhere, YouGov shows that Labour maintains its new-found lead on the economy.  The Chancellor, once regarded as the natural successor to Cameron, will struggle to restore his political reputation.

A baker holds a tray of pastries as she joins supporters outside Downing Street in London on April 26, 2012 to protest and deliver a petition against the so-called 'pasty tax'. Photograph: Getty Images.

George Eaton is political editor of the New Statesman.

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Theresa May gambles that the EU will blink first

In her Brexit speech, the Prime Minister raised the stakes by declaring that "no deal for Britain is better than a bad deal for Britain". 

It was at Lancaster House in 1988 that Margaret Thatcher delivered a speech heralding British membership of the single market. Twenty eight years later, at the same venue, Theresa May confirmed the UK’s retreat.

As had been clear ever since her Brexit speech in October, May recognises that her primary objective of controlling immigration is incompatible with continued membership. Inside the single market, she noted, the UK would still have to accept free movement and the rulings of the European Court of Justice (ECJ). “It would to all intents and purposes mean not leaving the EU at all,” May surmised.

The Prime Minister also confirmed, as anticipated, that the UK would no longer remain a full member of the Customs Union. “We want to get out into the wider world, to trade and do business all around the globe,” May declared.

But she also recognises that a substantial proportion of this will continue to be with Europe (the destination for half of current UK exports). Her ambition, she declared, was “a new, comprehensive, bold and ambitious Free Trade Agreement”. May added that she wanted either “a completely new customs agreement” or associate membership of the Customs Union.

Though the Prime Minister has long ruled out free movement and the acceptance of ECJ jurisdiction, she has not pledged to end budget contributions. But in her speech she diminished this potential concession, warning that the days when the UK provided “vast” amounts were over.

Having signalled what she wanted to take from the EU, what did May have to give? She struck a notably more conciliatory tone, emphasising that it was “overwhelmingly and compellingly in Britain’s national interest that the EU should succeed”. The day after Donald Trump gleefully predicted the institution’s demise, her words were in marked contrast to those of the president-elect.

In an age of Isis and Russian revanchism, May also emphasised the UK’s “unique intelligence capabilities” which would help to keep “people in Europe safe from terrorism”. She added: “At a time when there is growing concern about European security, Britain’s servicemen and women, based in European countries including Estonia, Poland and Romania, will continue to do their duty. We are leaving the European Union, but we are not leaving Europe.”

The EU’s defining political objective is to ensure that others do not follow the UK out of the club. The rise of nationalists such as Marine Le Pen, Alternative für Deutschland and the Dutch Partij voor de Vrijheid (Party for Freedom) has made Europe less, rather than more, amenable to British demands. In this hazardous climate, the UK cannot be seen to enjoy a cost-free Brexit.

May’s wager is that the price will not be excessive. She warned that a “punitive deal that punishes Britain” would be “an act of calamitous self-harm”. But as Greece can testify, economic self-interest does not always trump politics.

Unlike David Cameron, however, who merely stated that he “ruled nothing out” during his EU renegotiation, May signalled that she was prepared to walk away. “No deal for Britain is better than a bad deal for Britain,” she declared. Such an outcome would prove economically calamitous for the UK, forcing it to accept punitively high tariffs. But in this face-off, May’s gamble is that Brussels will blink first.

George Eaton is political editor of the New Statesman.