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

Scotland's huge deficit is an obstacle to independence

The country's borrowing level (9.5 per cent) is now double that of the UK. 

Ever since Brexit, and indeed before it, the possibility of a second Scottish independence referendum has loomed. But today's public spending figures are one reason why the SNP will proceed with caution. They show that Scotland's deficit has risen to £14.8bn (9.5 per cent of GDP) even when a geographic share of North Sea revenue is included. That is more than double the UK's borrowing level, which last year fell from 5 per cent of GDP to 4 per cent. 

The "oil bonus" that nationalists once boasted of has become almost non-existent. North Sea revenue last year fell from £1.8bn to a mere £60m. Total public sector revenue was £400 per person lower than for the UK, while expenditure was £1,200 higher.  

Nicola Sturgeon pre-empted the figures by warning of the cost to the Scottish economy of Brexit (which her government estimated at between £1.7bn and £11.2.bn a year by 2030). But the country's black hole means the risks of independence remain immense. As a new state, Scotland would be forced to pay a premium on its debt, resulting in an even greater fiscal gap. Were it to use the pound without permission, with no independent central bank and no lender of last resort, borrowing costs would rise still further. To offset a Greek-style crisis, Scotland would be forced to impose considerable austerity. 

Nor would EU membership provide a panacea. Scotland would likely be forced to wait years to join owing to the scepticism of Spain and others facing their own secessionist movements. At present, two-thirds of the country's exports go to the UK, compared to just 15 per cent to other EU states.

The SNP will only demand a second referendum when it is convinced it can win. At present, that is far from certain. Though support for independence rose following the Brexit vote, a recent YouGov survey last month gave the No side a four-point lead (45-40). Until the nationalists enjoy sustained poll leads (as they have never done before), the SNP will avoid rejoining battle. Today's figures are a considerable obstacle to doing so. 

George Eaton is political editor of the New Statesman.