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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By refusing to stand down, Jeremy Corbyn has betrayed the British working classes

The most successful Labour politicians of the last decades brought to politics not only a burning desire to improve the lot of the working classes but also an understanding of how free market economies work.

Jeremy Corbyn has defended his refusal to resign the leadership of the Labour Party on the grounds that to do so would be betraying all his supporters in the country at large. But by staying on as leader of the party and hence dooming it to heavy defeat in the next general election he would be betraying the interests of the working classes this country. More years of Tory rule means more years of austerity, further cuts in public services, and perpetuation of the gross inequality of incomes. The former Chief Secretary to the Treasury, Seema Malhotra, made the same point when she told Newsnight that “We have an unelectable leader, and if we lose elections then the price of our failure is paid by the working people of this country and their families who do not have a government to stand up for them.”

Of course, in different ways, many leading figures in the Labour movement, particularly in the trade unions, have betrayed the interests of the working classes for several decades. For example, in contrast with their union counterparts in the Scandinavian countries who pressurised governments to help move workers out of declining industries into expanding sectors of the economy, many British trade union leaders adopted the opposite policy. More generally, the trade unions have played a big part in the election of Labour party leaders, like Corbyn, who were unlikely to win a parliamentary election, thereby perpetuating the rule of Tory governments dedicated to promoting the interests of the richer sections of society.

And worse still, even in opposition Corbyn failed to protect the interests of the working classes. He did this by his abysmal failure to understand the significance of Tory economic policies. For example, when the Chancellor of the Exchequer had finished presenting the last budget, in which taxes were reduced for the rich at the expense of public services that benefit everybody, especially the poor, the best John McConnell could do – presumably in agreement with Corbyn – was to stand up and mock the Chancellor for having failed to fulfill his party’s old promise to balance the budget by this year! Obviously neither he nor Corbyn understood that had the government done so the effects on working class standards of living would have been even worse. Neither of them seems to have learnt that the object of fiscal policy is to balance the economy, not the budget.

Instead, they have gone along with Tory myth about the importance of not leaving future generations with the burden of debt. They have never asked “To whom would future generations owe this debt?” To their dead ancestors? To Martians? When Cameron and his accomplices banged on about how important it was to cut public expenditures because the average household in Britain owed about £3,000, they never pointed out that this meant that the average household in Britain was a creditor to the tune of about the same amount (after allowing for net overseas lending). Instead they went along with all this balanced budget nonsense. They did not understand that balancing the budget was just the excuse needed to justify the prime objective of the Tory Party, namely to reduce public expenditures in order to be able to reduce taxes on the rich. For Corbyn and his allies to go along with an overriding objective of balancing the budget is breathtaking economic illiteracy. And the working classes have paid the price.

One left-wing member of the panel on Question Time last week complained that the interests of the working classes were ignored by “the elite”. But it is members of the elite who have been most successful in promoting the interests of the working classes. The most successful pro-working class governments since the war have all been led mainly by politicians who would be castigated for being part of the elite, such as Clement Atlee, Harold Wilson, Tony Crosland, Barbara Castle, Richard Crossman, Roy Jenkins, Denis Healey, Tony Blair, and many others too numerous to list. They brought to politics not only a burning desire to improve the lot of the working classes (from which some of them, like me, had emerged) and reduce inequality in society but also an understanding of how free market economies work and how to deal with its deficiencies. This happens to be more effective than ignorant rhetoric that can only stroke the egos and satisfy the vanity of demagogues

People of stature like those I have singled out above seem to be much more rare in politics these days. But there is surely no need to go to other extreme and persist with leaders like Jeremy Corbyn, a certain election loser, however pure his motives and principled his ambitions.

Wilfred Beckerman is an Emeritus Fellow of Balliol College, Oxford, and was, for several years in the 1970s, the economics correspondent for the New Statesman