The politics behind Osborne’s Spending Review

The Chancellor’s benefit cuts are designed to clear the Labour-voting poor out of London.

Like Gordon Brown before him, George Osborne is a highly political chancellor. Whenever possible, his measures are designed to meet both economic and electoral imperatives. The Chancellor's overarching project, as Benedict Brogan writes in today's Telegraph, is to construct a Tory majority between now and polling day.

Again like Brown, Osborne is also his party's chief electoral strategist and he does not share David Cameron's instinctive fondness for coalition government. He is determined to see the return of one-party Conservative rule.

The best example of Osborne's political and economic objectives working in tandem is the recently announced cap on benefits. The policy is not just a populist measure, designed to reassure the Daily Mail-reading classes, it is an act of supreme electoral engineering. The £500-a-week cap will trigger the largest population movement since the Second World War, as the poor are forced out of inner London and pushed into the suburbs, where rents are cheaper and living costs lower. The decision to charge new social housing tenants at least 80 per cent of the market rate will have a similar effect.

As a matter of social policy this is noteworthy enough, but, as I've argued before, for the Conservatives this is also a measure pregnant with political motives.

I noted then:

The Tories believe that the flight of poor, mainly Labour-voting families from inner London will allow hitherto unwinnable seats to fall into their lap. Many in the party are still aggrieved over their failure to win constituencies such as Westminster North (Joanne Cash) and Hammersmith (Shaun Bailey) – seats they felt were there for the taking.

Since I wrote those words, Conservative figures have openly acknowledged their political intentions. Bailey, the candidate defeated in west London, was recently heard to remark:

If you have a group of people that think that one government will advocate for them and one won't, of course they'll vote that way. And that's the fight for the Conservatives 'cos that's why inner-city seats are so hard to win – because Labour has filled them with poor people.

One unnamed Conservative minister was quoted as describing the policy as "the Highland Clearances" – and not unfavourably.

Conservative strategists believe that their poor performance in seats with large numbers of ethnic-minority voters and/or large concentrations of social housing was one of the main reasons they failed to win the last election. The cap on benefits is part of the party's supreme effort to overcome this defect.

George Eaton is political editor of the New Statesman.

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How can Britain become a nation of homeowners?

David Cameron must unlock the spirit of his postwar predecessors to get the housing market back on track. 

In the 1955 election, Anthony Eden described turning Britain into a “property-owning democracy” as his – and by extension, the Conservative Party’s – overarching mission.

60 years later, what’s changed? Then, as now, an Old Etonian sits in Downing Street. Then, as now, Labour are badly riven between left and right, with their last stay in government widely believed – by their activists at least – to have been a disappointment. Then as now, few commentators seriously believe the Tories will be out of power any time soon.

But as for a property-owning democracy? That’s going less well.

When Eden won in 1955, around a third of people owned their own homes. By the time the Conservative government gave way to Harold Wilson in 1964, 42 per cent of households were owner-occupiers.

That kicked off a long period – from the mid-50s right until the fall of the Berlin Wall – in which home ownership increased, before staying roughly flat at 70 per cent of the population from 1991 to 2001.

But over the course of the next decade, for the first time in over a hundred years, the proportion of owner-occupiers went to into reverse. Just 64 percent of households were owner-occupier in 2011. No-one seriously believes that number will have gone anywhere other than down by the time of the next census in 2021. Most troublingly, in London – which, for the most part, gives us a fairly accurate idea of what the demographics of Britain as a whole will be in 30 years’ time – more than half of households are now renters.

What’s gone wrong?

In short, property prices have shot out of reach of increasing numbers of people. The British housing market increasingly gets a failing grade at “Social Contract 101”: could someone, without a backstop of parental or family capital, entering the workforce today, working full-time, seriously hope to retire in 50 years in their own home with their mortgage paid off?

It’s useful to compare and contrast the policy levers of those two Old Etonians, Eden and Cameron. Cameron, so far, has favoured demand-side solutions: Help to Buy and the new Help to Buy ISA.

To take the second, newer of those two policy innovations first: the Help to Buy ISA. Does it work?

Well, if you are a pre-existing saver – you can’t use the Help to Buy ISA for another tax year. And you have to stop putting money into any existing ISAs. So anyone putting a little aside at the moment – not going to feel the benefit of a Help to Buy ISA.

And anyone solely reliant on a Help to Buy ISA – the most you can benefit from, if you are single, it is an extra three grand from the government. This is not going to shift any houses any time soon.

What it is is a bung for the only working-age demographic to have done well out of the Coalition: dual-earner couples with no children earning above average income.

What about Help to Buy itself? At the margins, Help to Buy is helping some people achieve completions – while driving up the big disincentive to home ownership in the shape of prices – and creating sub-prime style risks for the taxpayer in future.

Eden, in contrast, preferred supply-side policies: his government, like every peacetime government from Baldwin until Thatcher’s it was a housebuilding government.

Why are house prices so high? Because there aren’t enough of them. The sector is over-regulated, underprovided, there isn’t enough housing either for social lets or for buyers. And until today’s Conservatives rediscover the spirit of Eden, that is unlikely to change.

I was at a Conservative party fringe (I was on the far left, both in terms of seating and politics).This is what I said, minus the ums, the ahs, and the moment my screensaver kicked in.

Stephen Bush is editor of the Staggers, the New Statesman’s political blog.