Osborne's speech: long on politics, short on growth

The Chancellor launched attack after attack on Labour, but where was the plan for growth?

When George Osborne addressed the Conservative conference he did so as his party's chief election strategist, not as Chancellor. His speech was long on politics, but staggeringly short on growth (indeed, the word didn't appear) and jobs.

As ever, one could not fault his chutzpah. He declared that the country must not "divide one group against another" before casually demonising welfare claimants as scroungers, "sleeping off a life on benefits". He insisted that everyone had been too optimistic about growth, forgetting those economists - Paul Krugman, Robert Skidelsky, our own David Blanchflower - who warned that his obsession with austerity would tip the country back into recession. And, for the first time since he abolished the 50p tax rate on earnings over £150,000, he uttered the words "we're all in it together". In one of his many assaults on Labour, Osborne declared, "All this talk about something for something and they've learned nothing about anything", but with the country back in recession (the only G20 country, with the exception of Italy, to be so) and borrowing up by 22% so far this year, it was he who gave the appearance of having learned nothing.

Faced with a crisis of demand, the government needs to stimulate growth through tax cuts and higher infrastructure spending. It could take advantage of the ultra-low interest rates that Osborne is so fond of boasting of and borrow for an emergency stimulus. But all the Chancellor offered was a fiendishly complex new scheme allowing workers to acquire shares in their companies in exchange for giving up employment rights. In Britain, already the third most deregulated labour market in the developed world, it is not excessive regulation or "red tape" that is constraining growth. But the Chancellor, blind to the need to revive "animal spirits", still acts as if it is.

He unambiguously ruled out a "mansion tax", vowing that "this party of home ownership will have no truck with it". Yet just 3.1% of homes are worth more than £1m and the tax, as proposed by Vince Cable, would only apply to those twice this amount. In rejecting higher property taxes, Osborne has missed an opportunity to prove that he really is more concerned about "the squeezed middle" than squeezed millionaires. His priority, he said, would be to further reduce "aggressive tax avoidance", but making the rich pay taxes they're meant to be paying anyway is not the same as raising taxes on them. If the Lib Dems are to avoid further humiliation, they will need something more in return for signing up to an additional £10bn of punitive welfare cuts.

As Osborne spoke, it became clear that David Cameron had contracted out the job of attacking Ed Miliband to his Chancellor. Evidently unsettled by the Labour leader's bravura speech, Osborne declared that it was "risible" to pretend that you can become a party of "one nation" just by repeating the phrase, and that Miliband, masquerading as a centrist, was, in reality, "moving to the left". But in his refusal to adopt a more balanced deficit reduction strategy and in his defence of the wealthy, it is the Chancellor who has vacated the centre ground and his party that has relinquished any claim to be a party of "one nation". Today's speech did nothing to correct those errors.

Chancellor George Osborne delivers his speech during the second day of the annual Conservative conference in Birmingham. Photograph: Getty Images.

George Eaton is political editor of the New Statesman.

Getty Images.
Show Hide image

Why relations between Theresa May and Philip Hammond became tense so quickly

The political imperative of controlling immigration is clashing with the economic imperative of maintaining growth. 

There is no relationship in government more important than that between the prime minister and the chancellor. When Theresa May entered No.10, she chose Philip Hammond, a dependable technocrat and long-standing ally who she had known since Oxford University. 

But relations between the pair have proved far tenser than anticipated. On Wednesday, Hammond suggested that students could be excluded from the net migration target. "We are having conversations within government about the most appropriate way to record and address net migration," he told the Treasury select committee. The Chancellor, in common with many others, has long regarded the inclusion of students as an obstacle to growth. 

The following day Hammond was publicly rebuked by No.10. "Our position on who is included in the figures has not changed, and we are categorically not reviewing whether or not students are included," a spokesman said (as I reported in advance, May believes that the public would see this move as "a fix"). 

This is not the only clash in May's first 100 days. Hammond was aggrieved by the Prime Minister's criticisms of loose monetary policy (which forced No.10 to state that it "respects the independence of the Bank of England") and is resisting tougher controls on foreign takeovers. The Chancellor has also struck a more sceptical tone on the UK's economic prospects. "It is clear to me that the British people did not vote on June 23 to become poorer," he declared in his conference speech, a signal that national prosperity must come before control of immigration. 

May and Hammond's relationship was never going to match the remarkable bond between David Cameron and George Osborne. But should relations worsen it risks becoming closer to that beween Gordon Brown and Alistair Darling. Like Hammond, Darling entered the Treasury as a calm technocrat and an ally of the PM. But the extraordinary circumstances of the financial crisis transformed him into a far more assertive figure.

In times of turmoil, there is an inevitable clash between political and economic priorities. As prime minister, Brown resisted talk of cuts for fear of the electoral consequences. But as chancellor, Darling was more concerned with the bottom line (backing a rise in VAT). By analogy, May is focused on the political imperative of controlling immigration, while Hammond is focused on the economic imperative of maintaining growth. If their relationship is to endure far tougher times they will soon need to find a middle way. 

George Eaton is political editor of the New Statesman.