The Staggers

The New Statesman’s rolling politics blog

Osborne's failure could cost the Tories a majority

The Chancellor will no longer be able to wipe the slate clean and offer tax cuts.

By George Eaton Published 17 November 2011 10:19

This morning's papers make grim reading for George Osborne. Unemployment is at a 17-year high and is likely to rise further. Growth is now expected to be just 1 per cent this year and next. Worst of all for the Chancellor, a deficit hawk, the government will be forced to borrow around £109bn more than forecast at the time of Spending Review and billions more than Alistair Darling would have. In addition, it is thought that Osborne will miss his target to eliminate the structural deficit by 2014-15 - the part of the deficit that remains even after growth has returned to normal - owing to the fact that the output gap - the difference between potential GDP and actual GDP - was smaller than thought. For the Tories, whose political fortunes are intertwined with those of economy, these are troubling times.

Osborne's pledge to eliminate the structural deficit in one parliament was based on a political timetable, not an economic one. By 2015, Osborne envisaged that the Tories would be able to boast that they had claned up "the mess" left by Labour - a powerful political narrative - and offer cuts in personal taxation. But anaemic growth, higher unemployment and, consequently, higher borrowing mean that this is an increasingly distant dream. Osborne's ultimate goal - a Tory majority - is slipping out of reach. As Peter Oborne writes in his Telegraph column this morning:

If the Chancellor gets it right, David Cameron's Conservative Party will probably command a majority after the next general election. If Osborne gets it wrong, his friend Cameron will go down in history as an Old Etonian version of Gordon Brown: a one-term prime minister who never won a general election ... Eighteen months after David Cameron entered Downing Street, it can be stated with stone cold certainty that George Osborne's economic strategy is not working.

Despite Labour's consistent lead in the opinion polls, there is a default assumption in Westminster that the next election is likely to result in a Tory majority. But several factors mean that this is no longer the case. The Tories continue to struggle in the north, where Labour leads by 28 points, and in Scotland, where Labour leads by 16 points. Ukip's recent surge in support - the party is on 6 per cent in the latest YouGov poll - is also troubling Tory strategists. Nigel Farage's party cost the Tories up to 21 seats at the last election (there were 21 constituencies in which the Ukip vote exceeded the Labour majority) and could cost them even more next time round. Finally, as Andrew Cooper, Cameron's pollster, knows all too well, the Tories remain the most toxic party. While 70 per cent of the electorate say they would be prepared to vote for Labour, just 58 per cent say they would consider voting Conservative. As ConservativeHome's Tim Montgomerie noted recently, "In order to win an election we need to convert a good three quarters of our potential voters while Labour only needs to capture a much smaller proportion."

The hope among the Tories was that the success of Osborne's economic plan would override all of this. A grateful electorate would rush to thank the Iron Chancellor for balancing the books. But the near-collapse of growth means that there is no chance of Osborne wiping the slate clean. The question the electorate, facing the biggest squeeze on living standards since the 1920s, will ask is "what was all the pain for?" The Tories had better have a very good answer.

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Tags: George Osborne

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17 comments

Thu, 2011-11-17 20:20 — Dickie1

@ The Tories

hahahhahahahhahhahahhahahahahahhahahahhahahhahahahhahahahhahahahhahahah

Thu, 2011-11-17 21:35 — Livers (not verified)

George will switch to Plan B now his 2015 target is dead.

And say it is the sign of strong, prudent leadership. Taking account of the situation and changing course.

After all, clinging on to Plan A is now doomed.

Maybe we will all benefit.. unless of course Plan B means even more austerity to snuff out any hopes of growth.

Thu, 2011-11-17 21:43 — swatantra nandanwar

Great to see all 3 Leaders at the Tech Prize Launch today. That co-operation in practice., and Scie4nce and Technology getting the recognition it deserves.
Also Ed gave an excellent speech today on Business and Enterprise and Entrepreneurs. Thats the influence of Chukka.
I've said before that until Labour recognises the role of business, enterprise and entrepreneurs, and learns to love all three, its going nowhere.

Thu, 2011-11-17 10:50 — swatantra nandanwar

The fact is The Coaltion was knocked 'by events dear boy, events'. And I doubt if Labour had been in Govt, it would have done any better, other than crisis management, as the present Govt is doing. Confidence has collapsed completely.
The NS should be calling for a Govt of National Unity, now.

Thu, 2011-11-17 11:02 — Yonmei

It's interesting how the Tory narrative that the 2008 global economic collapse was just "mess left by Labour" has backfired on them.

If their lie had been true, and the recession was the result of excessive public spending by Labour, or by anything Labour had done, it would be within the bounds of plausibility that the Conservatives could have "fixed it" - even though in 1997 the incoming Labour government had pledged to keep to Tory levels of spending for the first two years (their first mistake) it was still possible for ordinary people to see a difference within months as Labour policies of social justice replaced Conservative policies of send-the-weakest-to-the-wall.

Had the Conservative party line been honest - if they'd stuck to the facts, that the 2008 collapse was global and the responsibility of financiers outwith national government control - it would hardly have been surprising that their policies were unable to improve things. (Obviously, the "austerity policy" was not going to improve anything anyway.)

Cameron and Osbourne are a pair of overprivileged idiots who have glided through life with very little to dismay or vex them. Putting them in charge of the UK is like making Emma Woodhouse mayor of Highbury... or Boris Johnson mayor of London.

Thu, 2011-11-17 11:06 — Steve (not verified)

The Tories might still win as they're set to gerrymander democracy. People are no longer to be compelled to register to vote. The Tories know that the farther down the social scale you go, the less likely it is you will bother to register.

It won't matter that Labour is ten points ahead in the polls if half their voters aren't registered to vote.

Thu, 2011-11-17 11:39 — Mizar (not verified)

swatantra nandanwar - you are wrong. "Events" has nothing to do with it. It is Tory and LibDems zealots and their stupidity which is driving us into ruin.

Thu, 2011-11-17 11:50 — Stu (not verified)

I say hung parliament again and another coalition between Tories and Libdems.

If the Tories followed the plans laid out by the Labour government but ended up changing it time after time, I doubt that Labour would have done anything different so no matter who you voted for the UK were bound to be doomed. So, put your seatbelts on, we're going for a bumpy ride.

Thu, 2011-11-17 11:52 — barbie

We might not like what we're hearing, but the truth is Labour did spend money it didn't have, and would have continued to do so. I'm all for paying off our debts not increasing it. However, besides the finances being important so is our freedom; and Europe is the next big question the Tories will have to face. They would get the majority they want if they gave us the public the right to choose our own destiny, that is over the EU memebership. We want out, and nothing else will do. The Tory vote would soar if they listened to the public, why are they so thick as not to see it?

Thu, 2011-11-17 13:13 — David Wearing1

They couldn't win an open goal election in 2010 - any halfway competant opposition party would've walked that one - and they haven't won an election at all for nearly 20 years. This is a party in long-term decline. The chances of them winning after 5 years of painful austerity were always slim. The chances of them winning after cutting more and borrowing more than Darling would have, after making success on that score their defining issue, are absolutely zero. If things go on as they are, you can kiss goodbye to the Tory party indefinitely.

Thu, 2011-11-17 13:14 — Ken Hall (not verified)

There is no getting away from the fact that labour spent 165 billion pounds more than it had to spend in it's last year in office, and about 140 billion the year before that. It was borrowing the equivalent of a "black Wednesday" every single week.

That sort of catastrophic ineptitude in basic accounting will take a decade to get over. And that is without Brown's G20 ' bail-out cure' of borrowing more and more to meet debt repayments blowing up all across the continent and America.

You cannot borrow your way out of DEBT! These bail outs are growing and are utterly unsustainable.

Ridiculous borrowing to bail out bankers is what is causing the pain all across Europe now. Privatising profit whilst socialising losses and dumping the bill on the working and middle class tax-payers.

That is a definition of corporatism, NOT capitalism. We need MORE capitalism if we are to get out of this labour and banker created mess!

Labour's disastrous handling of the economy and their inappropriate controls of the City got us into this mess. The tories are not cutting anywhere near enough to boost business and investment to get us out of this mess.

Thu, 2011-11-17 13:23 — Des Demona (not verified)

@ Ken Hall

I've noticed you are a big UKIP supporter on the grounds that the Tories are not 'conservative' enough.

Just out of interest, what is it that makes you think that all the time and trouble you go to to post on a left leaning publication is going to make a blind bit of difference? Is it some kind of evangelical zeal?

Thu, 2011-11-17 13:24 — frances smith (not verified)

well george can't say he wasn't warned, that if he cut too fast this would happen.

but the bonkers policy ideas from steve hilton haven't helped.

its strange what supposedly rational people can persuade themselves will be the outcome of something, even when so many people tell them otherwise, i wonder who he got advice from on cutting the deficit so fast?

Thu, 2011-11-17 13:42 — David Wearing1

"You cannot borrow your way out of DEBT!"

This is just illiterate. Sorry. And liberal use of caps lock doesn't add any credibility to it, I'm afraid.

If you borrow to invest then the return will help you pay your debt, and increase your productive capacity overall.

If you simply slash away at your productive capacity you (1) cause immediate pain, (2) do long term damage and (3) may even end up borrowing more because you have destroyed your own capacity to generate revenue.

Self-flagellation and the wearing of hair-shirts was once seen as the path to virtue for simple-minded religious zealouts. As far as economics is concerned, it appears that's still the case.

Thu, 2011-11-17 14:10 — Neverwas (not verified)

"If you borrow to invest then the return will help you pay your debt, and increase your productive capacity overall."

You mean invest in ever more generous benefits for economically inactive people? In immigrants who end up with higher levels of unemployment than other groups? In self-congratulatory trophy projects such as the London Olympics? And how are those going to pay the higher interest rates the bond market will demand (see Ireland, Portugal, Greece, Italy, Spain)?

Thu, 2011-11-17 16:33 — madasafish

Things are likely to get a lot worse.

All we are in is the lull before the second and more devastating storm.. 2008 being the first one.

By the end of it, I suspect the Welfare State as we know it will be broken up . probably by the next government - which is likely to be a Labour one.. (if Ed Milliband can make himself electable or is replaced by someone who is).

The cause will be twofold: but primarily a lack of money. And secondly because in hard times - which could make the 1930s look like a picnic - those who pay taxes will not tolerate paying for a system which rewards the unfit, the illegals and the workshy..