George Osborne and David Cameron speak to business leaders at the AQL centre on February 5, 2015 in Leeds. Photograph: Getty Images.
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Osborne's courting of the silver vote shows the Tories' limited ambition

The Conservatives are more focused on winning back traditional supporters than attracting new ones. 

Like his predecessor but one, Gordon Brown, George Osborne is an intensely political Chancellor. Wherever possible, economic policies are designed to advance electoral aims. That is the case with today's announcement that the government's pensioner bonds scheme will be extended by three months. The bonds, which pay an interest rate of 2.8 per cent for one year and 4 per cent for three years, have been purchased by 610,000 over-65s since they were launched last year, making them "the most successful saving product this country had ever seen" (as Osborne told Andrew Marr this morning). 

There is a simple explanation for the largesse showered on the elderly: they vote. In 2010, 76 per cent of over-65s turned out, more than any other age group, with the Conservatives polling 44 per cent among them - a 13-point lead over Labour. But the surge in support for Ukip among pensioners (nearly 60 per cent of the party's supporters are over-55) means the Tories need to work to win them back. In addition to Osborne's gifts, they have pledged to triple-lock the state pension (so that it increases by the rate of inflation, average earnings or 2.5 per cent, whichever is highest), and will almost certainly continue to protect universal benefits such as Winter Fuel Payments, free bus passes and free TV licences.

There is anger among the libertarian right at this preferential treatement. The IEA's head of public policy Ryan Bourne wrote of the pensioner bonds: "This comes at a time when the government could borrow by issuing three-year bonds with yields of around 0.6 per cent. In other words, the government is deliberately borrowing more expensively than it needs to, guaranteeing a healthy return for pensioners who are wealthy enough to be able to purchase up to the £10,000 limit. No wonder the registration website keeps crashing.

"This bond issuance is not just misguided because it crowds out other investment activity. Borrowing more expensively than the government needs to is effectively a direct subsidy to wealthier pensioners from the working-age population. Though in the grand scheme of things this will only be a subsidy to the tune of hundreds of millions, rather than billions, the likely cost of this policy will be as high as several of the controversial welfare eligibility changes which the government claimed were absolutely necessary to help improve the public finances."

But as well as the morality of this approach, the Tories should consider the politics, too. Courting the silver vote may make short-term sense but if they are to ever win a majority again, the Conservative need to do far more to appeal to the young, a group among whom they currently struggle. The Tories are fond of deriding Labour’s alleged "35 per cent strategy", under which a coalition of the party’s core supporters and Lib Dem defectors allow it to crawl over the electoral finish line – yet today's announcement is a reminder of their own limited ambitions. The grey vote might enable the Tories to cling on as the single largest party but it offers no route to a majority. 

George Eaton is political editor of the New Statesman.

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How austere will Philip Hammond be?

The Chancellor must choose between softening or abandoning George Osborne's approach in his Autumn Statement. 

After becoming Chancellor, Philip Hammond was swift to confirm that George Osborne's budget surplus target would be abandoned. The move was hailed by some as the beginning of a new era of fiscal policy - but it was more modest than it appeared. Rather than a statement of principle, the abandonment of the 2019-20 target was merely an acceptance of reality. In the absence of additional spending cuts or tax rises, it would inevitably be missed (as Osborne himself recognised following the EU referendum). The decision did not represent, as some suggested, "the end of austerity".

Ahead of his first Autumn Statement on 23 November, the defining choice facing Hammond is whether to make a more radical break. As a new Resolution Foundation report notes, the Chancellor could either delay the surplus target (the conservative option) or embrace an alternative goal. Were he to seek a current budget suplus, rather than an overall one (as Labour pledged at the last general election), Hammond would avoid the need for further austerity and give himself up to £17bn of headroom. This would allow him to borrow for investment and to provide support for the "just managing" families (as Theresa May calls them) who will be squeezed by the continuing benefits freeze.

Alternatively, should Hammond merely delay Osborne's surplus target by a year (to 2020-21), he would be forced to impose an additional £9bn of tax rises or spending cuts. Were he to reject any further fiscal tightening, a surplus would not be achieved until 2023-24 - too late to be politically relevant. 

The most logical option, as the Resolution Foundation concludes, is for Hammond to target a current surplus. But since entering office, both he and May have emphasised their continuing commitment to fiscal conservatism ("He talks about austerity – I call it living within our means," the latter told Jeremy Corbyn at her first PMQs). For Hammond to abandon the goal of the UK's first budget surplus since 2001-02 would be a defining moment. 

George Eaton is political editor of the New Statesman.