Osborne's "no money left" claim could backfire

The Chancellor's old tactic is now a reminder of his failure.

Liam Byrne's famous valedictory note to David Laws ("there's no money left") must rank as one of the least helpful contributions by a New Labour cabinet minister. His quip perpetuated two myths: that Britain could not afford to borrow for growth and that the deficit was the result of overspending by the Brown government, rather than a dramatic fall in tax revenues caused by the financial crisis.

It's a line that George Osborne, under pressure from all sides to cut taxes, has now reprised. Today's stark Telegraph front page (Osborne: UK has run out of money) leads on the Chancellor's assertion on Sky News that "the British government has run out of money because all the money was spent in the good years". In other words, don't expect a big Budget giveaway. Any tax cuts will be paid for by tax rises or spending cuts elsewhere.

His stance is nothing new. Ever since his days as shadow chancellor, Osborne has opposed what he calls "unfunded tax cuts". But it's his rhetoric that's striking. Ahead of his third Budget as Chancellor, the claim that the "British government has run out of money" could hinder Osborne as much as it helps him. Labour and Tory MPs alike will note that the government is set to borrow around £158bn more than previously forecast. If the Chancellor can borrow to meet the cost of unemployment (in the form of higher welfare payments), why not borrow for growth? (Britain's bond yields remain at record lows).

The Institute for Fiscal Studies, for instance, has said that Osborne could cut taxes by £10bn without triggering a bond market revolt and a rise in interest rates.

As Tory MP David Ruffley said of a temporary VAT cut:

Even if we can't find the money for tax cuts from public spending savings, we could add it to the deficit and it is not going to send the markets into a tizzy, I don't think anyone really believes that. The markets will not go haywire if there was a modest loosening in borrowing in the short run if it was for the right reason.

From the Tory right, here's Roger Helmer MEP:

Memo to Osborne: We're not asking for "debt-fuelled tax cuts". We want modest pro-growth cuts (50% rate, NI holidays) that cd cost nothing.

Tory backbenchers, many of whom share Arthur Laffer's belief that tax cuts are self-financing, will have little time for the Chancellor's excuses.

Osborne's decision to blame Britain's economic woes on "the mess" left by Labour has served him well politically. But it is subject to diminishing returns. Conservative cabinet ministers who trot out this line on Question Time are now greeted with boos, not applause. After nearly two years at the helm, Osborne cannot avoid his share of responsibility for the economy. What was once a reminder of Labour's profligacy, is now a reminder of his failure.

George Eaton is political editor of the New Statesman.

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Is Yvette Cooper surging?

The bookmakers and Westminster are in a flurry. Is Yvette Cooper going to win after all? I'm not convinced. 

Is Yvette Cooper surging? The bookmakers have cut her odds, making her the second favourite after Jeremy Corbyn, and Westminster – and Labour more generally – is abuzz with chatter that it will be her, not Corbyn, who becomes leader on September 12. Are they right? A couple of thoughts:

I wouldn’t trust the bookmakers’ odds as far as I could throw them

When Jeremy Corbyn first entered the race his odds were at 100 to 1. When he secured the endorsement of Unite, Britain’s trade union, his odds were tied with Liz Kendall, who nobody – not even her closest allies – now believes will win the Labour leadership. When I first tipped the Islington North MP for the top job, his odds were still at 3 to 1.

Remember bookmakers aren’t trying to predict the future, they’re trying to turn a profit. (As are experienced betters – when Cooper’s odds were long, it was good sense to chuck some money on there, just to secure a win-win scenario. I wouldn’t be surprised if Burnham’s odds improve a bit as some people hedge for a surprise win for the shadow health secretary, too.)

I still don’t think that there is a plausible path to victory for Yvette Cooper

There is a lively debate playing out – much of it in on The Staggers – about which one of Cooper or Burnham is best-placed to stop Corbyn. Team Cooper say that their data shows that their candidate is the one to stop Corbyn. Team Burnham, unsurprisingly, say the reverse. But Team Kendall, the mayoral campaigns, and the Corbyn team also believe that it is Burnham, not Cooper, who can stop Corbyn.

They think that the shadow health secretary is a “bad bank”: full of second preferences for Corbyn. One senior Blairite, who loathes Burnham with a passion, told me that “only Andy can stop Corbyn, it’s as simple as that”.

I haven’t seen a complete breakdown of every CLP nomination – but I have seen around 40, and they support that argument. Luke Akehurst, a cheerleader for Cooper, published figures that support the “bad bank” theory as well.   Both YouGov polls show a larger pool of Corbyn second preferences among Burnham’s votes than Cooper’s.

But it doesn’t matter, because Andy Burnham can’t make the final round anyway

The “bad bank” row, while souring relations between Burnhamettes and Cooperinos even further, is interesting but academic.  Either Jeremy Corbyn will win outright or he will face Cooper in the final round. If Liz Kendall is eliminated, her second preferences will go to Cooper by an overwhelming margin.

Yes, large numbers of Kendall-supporting MPs are throwing their weight behind Burnham. But Kendall’s supporters are overwhelmingly giving their second preferences to Cooper regardless. My estimate, from both looking at CLP nominations and speaking to party members, is that around 80 to 90 per cent of Kendall’s second preferences will go to Cooper. Burnham’s gaffes – his “when it’s time” remark about Labour having a woman leader, that he appears to have a clapometer instead of a moral compass – have discredited him in him the eyes of many. While Burnham has shrunk, Cooper has grown. And for others, who can’t distinguish between Burnham and Cooper, they’d prefer to have “a crap woman rather than another crap man” in the words of one.

This holds even for Kendall backers who believe that Burnham is a bad bank. A repeated refrain from her supporters is that they simply couldn’t bring themselves to give Burnham their 2nd preference over Cooper. One senior insider, who has been telling his friends that they have to opt for Burnham over Cooper, told me that “faced with my own paper, I can’t vote for that man”.

Interventions from past leaders fall on deaf ears

A lot has happened to change the Labour party in recent years, but one often neglected aspect is this: the Labour right has lost two elections on the bounce. Yes, Ed Miliband may have rejected most of New Labour’s legacy and approach, but he was still a protégé of Gordon Brown and included figures like Rachel Reeves, Ed Balls and Jim Murphy in his shadow cabinet.  Yvette Cooper and Andy Burnham were senior figures during both defeats. And the same MPs who are now warning that Corbyn will doom the Labour Party to defeat were, just months ago, saying that Miliband was destined for Downing Street and only five years ago were saying that Gordon Brown was going to stay there.

Labour members don’t trust the press

A sizeable number of Labour party activists believe that the media is against them and will always have it in for them. They are not listening to articles about Jeremy Corbyn’s past associations or reading analyses of why Labour lost. Those big, gamechanging moments in the last month? Didn’t change anything.

100,000 people didn’t join the Labour party on deadline day to vote against Jeremy Corbyn

On the last day of registration, so many people tried to register to vote in the Labour leadership election that they broke the website. They weren’t doing so on the off-chance that the day after, Yvette Cooper would deliver the speech of her life. Yes, some of those sign-ups were duplicates, and 3,000 of them have been “purged”.  That still leaves an overwhelmingly large number of sign-ups who are going to go for Corbyn.

It doesn’t look as if anyone is turning off Corbyn

Yes, Sky News’ self-selecting poll is not representative of anything other than enthusiasm. But, equally, if Yvette Cooper is really going to beat Jeremy Corbyn, surely, surely, she wouldn’t be in third place behind Liz Kendall according to Sky’s post-debate poll. Surely she wouldn’t have been the winner according to just 6.1 per cent of viewers against Corbyn’s 80.7 per cent. 

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