The real message of Osborne's Budget: as you were, only poorer

The Chancellor's gamble remains that the growth will come, that the pain will be followed by gain. But he has been wrong every time so far.

It always takes a few days for a clear picture to emerge of the economic measures that the Chancellor puts in his Budget. The Treasury is in the business of pushing its preferred analysis to the front; journalists and opposition parties are in the business of ferreting around for buried bodies out the back.

In this case we’ll have to wait even longer than usual because George Osborne’s fourth budget is really the first half of a story to be continued in the spending review in June. Today’s measures are advertised as fiscally neutral – meaning any tax cuts are balanced with rises elsewhere or equivalent cuts to spending. The Treasury says there is money available for some of the Chancellor’s giveaways from departmental “underspend”, from a crackdown on “aggressive tax avoidance” and from previously announced adjustments to the inheritance tax threshold. But the reality is that Osborne wanted to finish his Budget speech with the overall level of taxation lower than when he started, which he did – corporation tax, beer duty, fuel duty, the income tax threshold and employer national insurance contributions are the headline reductions. And in the absence of growth and no certainty that Excehquer revenues will rise any time soon, the pressure of desperately chasing a receding deficit-reduction target necessarily falls on the departments whose budgets are not “ring-fenced”.

The spending review will impose another £11.5bn in cuts on top of savings made in previous spending rounds and budgets. The negotiations between the Treasury and ministers and between the two coalition parties over what that means in practice and who takes the pain will dominate politics over the next three months. Tory ministers as much as Lib Dems are starting to get seriously Bolshie in resisting the axe blows raining down on their heads.

So what we heard today was above all a statement of political positioning by the Chancellor. He has no intention of conceding that his own policies are in any way responsible for the parlous state of the national finances (deficit reduction stalled; debt rising) so he is obliged to pretend that the broad outline of the strategy is the right one and that only extraneous and transient factors are to blame for disappointing economic performance.

Osborne was careful in his preamble to make sure the latest round of turbulence in the eurozone was well advertised. The mangy dog of a continental crisis, he seemed to be saying, ate his growth homework. This is consistent with conversations I’ve had with people in the Treasury in recent months who insist that the measures taken by the coalition so far are exactly the right ones to “create the conditions for growth” and that the only problem is that the growth itself is just a bit later arriving than they had hoped. I think a lot of them genuinely believe this to be the case and that good times – or at least better times – are around the corner. Then, like passengers queuing for a bus in the freezing rain, British voters will be so grateful for the arrival of a nice warm recovery that they will sink happily into their seats, forget the anger they were nursing just moments before and thank the Tory driver on polling day.

With that scenario in mind, the Chancellor was today sending signals of encouragement to people whose support the Tories desperately need but who might be losing faith. That is, in essence, people on low and middle incomes, struggling to get by on stagnant wages, with onerous childcare costs, worrying about how they might look after ageing parents and generally weighed down by the rising cost of living.

What Osborne’s study of opinion polls and focus groups will have told him is that many of these people are surprisingly stoical about the economy. They accept the Tory argument that Britain collectively “lived beyond its means” and they see honesty about the need for painful restraint on spending as the starting point for any politician wanting to be taken seriously as a manager of the economy. But separately, confidence in the coalition to run anything at all is slipping badly. The general aura of policy reversal, shambles, disunity and the gloom of prolonged stagnation has seen voters drifting away from the Tories, some to Labour, some to Ukip, many to floating abstention.

In particular, Osborne has his eye on voters who once flocked to the Thatcher message of self-reliance and enterprise – the “aspiration nation”. He wants to revive the idea that the Tory party is primarily for people who want to get on in life (as opposed to the current hazardous perception that it is run for people who have already arrived and are rolling in privilege). Hence the emphasis on mortgage underwriting devices to help people both get onto the property ladder and advance further up it; hence accelerating the rise in personal income tax allowance; hence also the emphasis on helping small enterprises take on more staff; hence the mini-favours on beer duty and fuel. This is a budget that is meant to feel like the Chancellor buying a pint for a family man with a van in a marginal seat in Essex and saying “I know it’s hard, but we’ll get there in the end.”

The problem, of course, is that there is no evidence that we are going anywhere at all. The underlying gamble is the same is it has been in Osborne’s previous three budgets – that the growth will come, that the pain will be followed by gain. He has been wrong every time so far and each time the net effect of cuts in services, freezes in wages and rising inflation is to make life that bit harder for the people the Chancellor is supposed to be wooing. The real message to most British people is bleak and simple: as you were, only poorer.

George Osborne poses for pictures outside 11 Downing Street in London, on March 20, 2013, as he prepares to unveil the Budget. Photograph: Getty Images.

Rafael Behr is political columnist at the Guardian and former political editor of the New Statesman

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Lord Empey: Northern Ireland likely to be without government for a year

The former UUP leader says Gerry Adams is now in "complete control" of Sinn Fein and no longer wants to be "trapped" by the Good Friday Agreement

The death of Martin McGuinness has made a devolution settlement in Northern Ireland even more unlikely and has left Gerry Adams in "complete control" of Sinn Fein, the former Ulster Unionist leader Reg Empey has said.

In a wide-ranging interview with the New Statesman on the day of McGuinness’ death, the UUP peer claimed his absence would leave a vacuum that would allow Adams, the Sinn Fein president, to consolidate his hold over the party and dictate the trajectory of the crucial negotiations to come. Sinn Fein have since pulled out of power-sharing talks, leaving Northern Ireland facing the prospect of direct rule from Westminster or a third election in the space of a year. 

Empey, who led the UUP between and 2005 and 2010 and was briefly acting first minister in 2001, went on to suggest that, “as things stand”, Northern Ireland is unlikely to see a return to fully devolved government before the inquiry into the Renewable Heat Incentive scheme is complete -  a process which could take up to a year to complete.

“Adams is now in complete control of Sinn Fein,” he said, adding that it remained unclear whether McGuinness’ successor Michelle O’Neill would be “allowed to plough an independent furrow”. “He has no equal within the organisation. He is in total command of Sinn Fein, and that is the way it is. I think he’s even more powerful today than he was before Martin died – by virtue of there just being nobody there.”

Asked what impact the passing of McGuinness, the former deputy first minister and leader of Sinn Fein in the north, would have on the chances of a devolution settlement, Empey, a member of the UUP’s Good Friday Agreement negotiating delegation, said: “I don’t think it’ll be positive – because, for all his faults, Martin was committed to making the institutions work. I don’t think Gerry Adams is as committed.

Empey added that he believed Adams did not want to work within the constitutional framework of the Good Friday Agreement. In a rebuke to nationalist claims that neither Northern Ireland secretary James Brokenshire nor Theresa May can act as honest or neutral brokers in power-sharing negotiations given their reliance on the DUP’s eight MPs, he said: “They’re not neutral. And they’re not supposed to be neutral.

“I don’t expect a prime minister or a secretary of state to be neutral. Brokenshire isn’t sitting wearing a hat with ostrich feathers – he’s not a governor, he’s a party politician who believes in the union. The language Sinn Fein uses makes it sound like they’re running a UN mandate... Gerry can go and shout at the British government all he likes. He doesn’t want to be trapped in the constitutional framework of the Belfast Agreement. He wants to move the debate outside those parameters, and he sees Brexit as a chance to mobilise opinion in the republic, and to be seen standing up for Irish interests.”

Empey went on to suggest that Adams, who he suggested exerted a “disruptive” influence on power-sharing talks, “might very well say” Sinn Fein were “’[taking a hard line] for Martin’s memory’” and added that he had been “hypocritical” in his approach.

“He’ll use all of that,” he said. “Republicans have always used people’s deaths to move the cause forward. The hunger strikers are the obvious example. They were effectively sacrificed to build up the base and energise people. But he still has to come to terms with the rest of us.”

Empey’s frank assessment of Sinn Fein’s likely approach to negotiations will cast yet more doubt on the prospect that devolved government might be salvaged before Monday’s deadline. Though he admitted Adams had demanded nothing unionists “should die in a ditch for”, he suggested neither party was likely to cede ground. “If Sinn Fein were to back down they would get hammered,” he said. “If Foster backs down the DUP would get hammered. So I think we’ve got ourselves a catch 22: they’ve both painted themselves into their respective corners.”

In addition, Empey accused DUP leader Arlene Foster of squandering the “dream scenario” unionist parties won at last year’s assembly election with a “disastrous” campaign, but added he did not believe she would resign despite repeated Sinn Fein demands for her to do so.

 “It’s very difficult to see how she’s turned that from being at the top of Mount Everest to being under five miles of water – because that’s where she is,” he said. “She no longer controls the institutions. Martin McGuinness effectively wrote her resignation letter for her. And it’s very difficult to see a way forward. The idea that she could stand down as first minister candidate and stay on as party leader is one option. But she could’ve done that for a few weeks before Christmas and we wouldn’t be here! She’s basically taken unionism from the top to the bottom – in less than a year”.

Though Foster has expressed regret over the tone of the DUP’s much-criticised election campaign and has been widely praised for her decision to attend Martin McGuinness’ funeral yesterday, she remains unlikely to step down, despite coded invitations for her to do so from several members of her own party.

The historically poor result for unionism she oversaw has led to calls from leading loyalists for the DUP and UUP – who lost 10 and eight seats respectively – to pursue a merger or electoral alliance, which Empey dismissed outright.

“The idea that you can weld all unionists together into a solid mass under a single leadership – I would struggle to see how that would actually work in practice. Can you cooperate at a certain level? I don’t doubt that that’s possible, especially with seats here. Trying to amalgamate everybody? I remain to be convinced that that should be the case.”

Accusing the DUP of having “led unionism into a valley”, and of “lashing out”, he added: “They’ll never absorb all of our votes. They can try as hard as they like, but they’d end up with fewer than they have now.”

Patrick Maguire writes about politics and is the 2016 winner of the Anthony Howard Award.