The lesson from history that is shaping Osborne's response to Miliband's price freeze

Labour won no credit when it tried to mimic Osborne's inheritance tax cut in 2007. The Chancellor is determined not to fall into the same trap with Miliband's gambit.

There was an audible sound of heads being scratched across Westminster last night as MPs and aides in all parties tried to work out what Sir John Major was up to. The former Prime Minister took the opportunity of a lunch with journalists to make what politicians like to call an "intervention" – lobbing a feral cat into a room full of particularly excitable pigeons.

There isn’t even agreement on what the better story from Major’s comments was. Tories who are obsessed with the European Union thought it was his revisiting old grudges from the Maastricht rebellions. Everyone else thought it was his suggestion of a windfall tax on energy companies. That was a recognition of the extent to which onerous gas and electricity bills – among other living costs – threaten to deprive the Tories of an economic feel-good factor even in a growing economy.

In recent years, Sir John has rationed his public pronouncements very carefully. When he has appeared on the Today programme it is usually to lend his elder statesman heft to David Cameron when the Prime Minister is under pressure (usually from somewhere in his own party). So naturally, the first response of many yesterday was to ask if this was supposed to be a spot of helpful out-riding – creating a safe political space for No.10 to move into the energy company-bashing business in pursuit of Ed Miliband. The Labour leader’s pledge to freeze bills has discombobulated Tory strategists who want to be on the side of profitable enterprise against lefty ideologues and have ended up siding with loathed corporations against consumers.

Labour MPs and aides were even texting their Tory friends and contacts to ask if that was their interpretation. It wasn’t and Downing Street fairly quickly hosed down any suggestion that it was planning something along the lines that Major proposed. The Treasury is especially disinclined to go down that route. Why?

I do not know what goes on inside George Osborne’s head but someone with a better claim than me to understand his thinking explained it roughly as follows. To best understand why the Chancellor will not want to cook up some policy wheeze to thwart Miliband’s energy offensive requires a brief trip back to autumn 2007.

A defining moment in Osborne’s career was the decision at the Conservative conference that year to call for a cut in inheritance tax. It was, famously, a popular move that disoriented Labour and led, in part, to Gordon Brown’s decision to abandon plans for a snap election. The then Prime Minister’s reputation never recovered from that humiliation. It was, in terms of Osborne’s status in his own party, a famous victory. So what does that have to do with the price of energy?

Well, what is often forgotten in the narration of that episode is that, in addition to freaking out about their election plans, Labour responded with their own half-baked inheritance tax plan. People who were close to the decision at the time insist it was something they had meant to do all along (well they would, wouldn’t they). No matter. The effect was to make the Treasury look more rattled and ineffective than it already did. Labour were never going to get any credit for a reactive inheritance tax move because the simple fact of trying only reinforced the impression that the opposition was setting the agenda and that the government had run out of ideas.

Naturally, Osborne has scrutinised this gambit from every angle. He has played it as a winner and war-gamed it from the perspective of the loser. What he will have concluded is that the Conservatives should not allow themselves to be bounced into any "big energy move". That doesn’t mean that they shouldn’t think of ways to address the fact that people think their bills are too high or that the Tories are on the side of corporate fat cats or that cost-of-living issues will play an important role in the next election. It simply means that they would be ill-advised to aim for one noisy, headline-grabbing initiative to counter Labour’s noisy headline-grabbing initiative. The very last think Osborne wants is to do is come across as a Miliband tribute act. That would be the effect of adopting Major’s windfall tax idea, even if the details of the policy – and the practicalities of implementation – are very different.

The Chancellor’s preferred response is to underline that a return to growth will be the single biggest factor alleviating the squeeze on household finances. He wants to cast the Tories as the party of grown-up economic management as contrasted with Labour’s reliance on desperate and unworkable gimmicks. He knows the Tories cannot afford to be seen as callous when people are suffering from rising living costs. Some response is required. But he also knows that any response needs to be seen to be originally Tory in inception and distinct enough from Miliband’s effort to avoid the charge of panic.

The pressure on Osborne to do something about energy prices might grow so intense that he relents and comes up with some showy response for his Autumn Statement on 4December. But for the time being his instincts and his study of recent history tell him that would be a mistake.

George Osborne at the Conservative conferene in Manchester last month. Photograph: Getty Images.

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

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Richmond is a wake-up call for Labour's Brexit strategy

No one made Labour stand in Richmond Park. 

Oh, Labour Party. There was a way through.

No one made you stand in Richmond Park. You could have "struck a blow against the government", you could have shared the Lib Dem success. Instead, you lost both your dignity and your deposit. And to cap it all (Christian Wolmar, take a bow) you self-nominated for a Nobel Prize for Mansplaining.

It’s like the party strategist is locked in the bowels of HQ, endlessly looping in reverse Olivia Newton John’s "Making a Good Thing Better".

And no one can think that today marks the end of the party’s problems on Brexit.

But the thing is: there’s no need to Labour on. You can fix it.

Set the government some tests. Table some amendments: “The government shall negotiate having regard to…”

  • What would be good for our economy (boost investment, trade and jobs).
  • What would enhance fairness (help individuals and communities who have missed out over the last decades).
  • What would deliver sovereignty (magnify our democratic control over our destiny).
  • What would improve finances (what Brexit makes us better off, individually and collectively). 

And say that, if the government does not meet those tests, the Labour party will not support the Article 50 deal. You’ll take some pain today – but no matter, the general election is not for years. And if the tests are well crafted they will be easy to defend.

Then wait for the negotiations to conclude. If in 2019, Boris Johnson returns bearing cake for all, if the tests are achieved, Labour will, and rightly, support the government’s Brexit deal. There will be no second referendum. And MPs in Leave voting constituencies will bear no Brexit penalty at the polls.

But if he returns with thin gruel? If the economy has tanked, if inflation is rising and living standards have slumped, and the deficit has ballooned – what then? The only winners will be door manufacturers. Across the country they will be hard at work replacing those kicked down at constituency offices by voters demanding a fix. Labour will be joined in rejecting the deal from all across the floor: Labour will have shown the way.

Because the party reads the electorate today as wanting Brexit, it concludes it must deliver it. But, even for those who think a politician’s job is to channel the electorate, this thinking discloses an error in logic. The task is not to read the political dynamic of today. It is to position itself for the dynamic when it matters - at the next general election

And by setting some economic tests for a good Brexit, Labour can buy an option on that for free.

An earlier version of this argument appeared on Jolyon Maugham's blog Waiting For Tax.

Jolyon Maugham is a barrister who advised Ed Miliband on tax policy. He blogs at Waiting for Tax, and writes for the NS on tax and legal issues.