George Osborne leaves10 Downing Street on October 7, 2013. Photograph: Getty Images.
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Osborne is rewriting history on austerity

The Chancellor's criticis never said that there would be no recovery, only that it would be painfully slow. And they were right.

George Osborne is in Washington today to deliver what has been billed in advance as his "I told you so" speech. With the IMF forecasting that Britain will grow faster than any other G7 country this year, the Chancellor has decided to round on his critics. In a preview of his AEI speech in the Wall Street Journal, he writes: "pessimistic predictions that fiscal consolidation was incompatible with economic recovery have turned out to be comprehensively wrong."

To the extent that growth last year was stronger than expected, Osborne can claim some vindication (almost alone, his chief economic adviser Rupert Harrison predicted that the economy would be "going gangbusters"). But in claiming that his critics have been proved "comprehensively wrong" (who could he possibly have in mind?), he is engaging in a crude rewrite of history. Contrary to the Chancellor, his Keynesian opponents never said that there would be no recovery, only that it would be painfully slow. 

And they were right. More than five years after the financial crisis, GDP is still 1.4 per cent below its pre-recession peak. The US, by contrast, is more than 5 per cent above. To this, the Conservative riposte is that the UK suffered a bigger crash than any other major country, with output falling by 7.2 per cent from peak to trough. But as Larry Summers noted during his recent face-off with Osborne at the World Economic Forum, "The deeper the valley you are in, the more rapidly you are able to grow." 

The tardiness of the recovery cannot be blamed on the Chanceller alone. The eurozone crisis, the rise in global commodity prices and the fragility of the banking sector have all constrained growth. But it is precisely for these reasons that wise minds counselled him against austerity. As Ed Balls warned in his Bloomberg speech in 2010, Osborne was "ripping out the foundations of the house just as the hurricane is about to hit". Hippocrates’s injunction to "first, do no harm" should have been his watchword. Instead, with the private sector already contracting, he chose to tighten the squeeze. VAT was raised to 20% and infrastructure spending was slashed by 42% (an act even coalition ministers now concede was reckless). 

We are still paying the price today. The double-dip may have been revised away (growth was 0% in Q1 2012 rather than -0.1%; only an economic illiterate would celebrate that) but the austerians didn't only promise that Britain would avoid another recession, they promised, in the words of Osborne's first Budget, "a steady and sustained economic recovery". What we got was the slowest recovery for more than 100 years. To meet the OBR's original 2010 forecasts, the economy would need to expand by 1.6 per cent each quarter between now and the election. That there is now growth is in spite of austerity, not because of it. Despite his unflinching rhetoric, the Chancellor has adopted his own "plan B" in the form of Help To Buy (the largest-ever state intervention in the mortgage market), higher capital spending and deferred deficit targets. 

Even judging by the flawed metrics he adopted in 2010, Osborne has failed. Britain has lost its AAA credit rating and borrowing is forecast to be £48bn higher this year (£108bn) than promised in his first Budget. Having originally vowed to eliminate the structural deficit by 2014-2015, he has been forced to extend this pledge by three years to 2017-2018. 

But despite this track record, Osborne is still offering his services as a forecaster. He predicts that those who argue that "the link between living standards and economic growth has broken, will also be proved wrong" (again, who could he possibly have in mind?) The Chancellor's boast is not just that wages will finally crawl above inflation this year (after falling for the longest period since 1870) but that the proceeds of growth will be fairly shared. 

He may well be right (and let us hope he is). But the experience of the US, where the wealthiest 1 per cent have captured 95 per cent of the proceeds of post-recession growth, shows why it would be complacent to assume as much. Even after real wages start to increase, there will be no rise in living standards for the millions of public sector workers who have had their salary increases capped at 1 per cent (nearly half the rate of inflation) and for those most reliant on benefits. That Osborne knows all of this (indeed, as Chancellor, he's responsible for it) makes his sanguinity all the more puzzling. Having recovered from his "omnishambles" low, the Chancellor is setting himself up for a fall all over again. 

George Eaton is political editor of the New Statesman.

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Tony Blair might be a toxic figure - but his influence endures

Politicians at home and abroad are borrowing from the former prime minister's playbook. 

On 24 May at Methodist Central Hall, Westminster, a short distance from where he once governed, Tony Blair resurfaced for a public discussion. Having arrived on an overnight flight, he looked drawn and puffy-eyed but soon warmed to his theme: a robust defence of liberal globalisation. He admitted, however, to bafflement at recent events in the world. "I thought I was pretty good at politics. But I look at politics today and I’m not sure I understand it."

Blair lost power in the summer of 2007. In the ensuing nine years, he lost reputation. His business ventures and alliances with autocrats have made him a pariah among both the public and his party. A YouGov poll published last year found that 61 per cent of voters regarded Blair as an electoral liability, while just 14 per cent viewed him as an asset. In contrast, John Major, whom he defeated by a landslide in 1997, had a neutral net rating of zero. It is ever harder to recall that Blair won not one general election (he is the only living Labour leader to have done so) but three.

His standing is likely to diminish further when the Iraq inquiry report is published on 6 July. Advance leaks to the Sunday Times suggest that he will be censured for allegedly guaranteeing British military support to the US a year before the invasion. Few minds on either side will be changed by the 2.6 million-word document. Yet its publication will help enshrine Iraq as the defining feature of a legacy that also includes the minimum wage, tax credits, Sure Start, devolution and civil partnerships.

Former leaders can ordinarily rely on their parties to act as a last line of defence. In Blair’s case, however, much of the greatest opprobrium comes from his own side. Jeremy Corbyn inclines to the view that Iraq was not merely a blunder but a crime. In last year’s Labour leadership election, Liz Kendall, the most Blair-esque candidate, was rewarded with 4.5 per cent of the vote. The former prime minister’s imprimatur has become the political equivalent of the black spot.

Yet outside of the Labour leadership, Blairism endures in notable and often surprising forms. Sadiq Khan won the party’s London mayoral selection by running to the left of Tessa Jowell, one of Tony Blair’s closest allies. But his successful campaign against Zac Goldsmith drew lessons from Blair’s election triumphs. Khan relentlessly presented himself as “pro-business” and reached out beyond Labour’s core vote. After his victory, he was liberated to use the B-word, contrasting what “Tony Blair did [in opposition]” with Corbyn’s approach.

In their defence of the UK’s EU membership, David Cameron and George Osborne have deployed arguments once advanced by New Labour. The strategically minded Chancellor has forged an unlikely friendship with his former nemesis Peter Mandelson. In the domestic sphere, through equal marriage, the National Living Wage and the 0.7 per cent overseas aid target, the Conservatives have built on, rather than dismantled, significant Labour achievements."They just swallowed the entire manual," Mandelson declared at a recent King’s College seminar. "They didn’t just read the executive summary, they are following the whole thing to the letter."

Among SNP supporters, "Blairite" is the pejorative of choice. But the parallels between their party and New Labour are more suggestive than they would wish. Like Blair, Alex Salmond and Nicola Sturgeon have avoided income tax rises in order to retain the support of middle-class Scottish conservatives. In a speech last August on education, Sturgeon echoed the Blairite mantra that "what matters is what works".

Beyond British shores, political leaders are similarly inspired by Blair – and less reticent about acknowledging as much. Matteo Renzi, the 41-year-old centre-left Italian prime minister, is a long-standing admirer. "I adore one of his sayings,” he remarked in 2013. “I love all the traditions of my party, except one: that of losing elections."

In France, the reform-minded prime minister, Manuel Valls, and the minister of economy, Emmanuel Macron, are also self-described Blairites. Macron, who in April launched his own political movement, En Marche!, will shortly decide whether to challenge for the presidency next year. When he was compared to Blair by the TV presenter Andrew Marr, his response reflected the former prime minister’s diminished domestic reputation: “I don’t know if, in your mouth, that is a promise or a threat.”

The continuing attraction of Blair’s “third way” to European politicians reflects the failure of the project’s social-democratic critics to construct an alternative. Those who have sought to do so have struggled both in office (François Hollande) and out of it (Ed Miliband). The left is increasingly polarised between reformers and radicals (Corbyn, Syriza, Podemos), with those in between straining for relevance.

Despite his long absences from Britain, Blair’s friends say that he remains immersed in the intricacies of Labour politics. He has privately warned MPs that any attempt to keep Corbyn off the ballot in the event of a leadership challenge would be overruled by the National Executive Committee. At Methodist Central Hall, he said of Corbyn’s supporters: “It’s clear they can take over a political party. What’s not clear to me is whether they can take over a country.”

It was Blair’s insufficient devotion to the former task that enabled the revival of the left. As Alastair Campbell recently acknowledged: “We failed to develop talent, failed to cement organisational and cultural change in the party and failed to secure our legacy.” Rather than effecting a permanent realignment, as the right of the party hoped and the left feared, New Labour failed to outlive its creators.

It instead endures in a fragmented form as politicians at home and abroad co-opt its defining features: its pro-business pragmatism, its big-tent electoralism, its presentational nous. Some of Corbyn’s ­allies privately fear that Labour will one day re-embrace Blairism. But its new adherents would never dare to use that name.

George Eaton is political editor of the New Statesman.

This article first appeared in the 26 May 2016 issue of the New Statesman, The Brexit odd squad