George Osborne holding the red box before leaving 11 Downing Street to deliver his Budget. Photograph: Getty Images.
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The Budget showed Osborne’s greatest skill: the ability to rebrand his failure as success

The Chancellor has made a virtue of coalition government and of missing his deficit targets. 

For five years, George Osborne has been managing failure. The Chancellor’s sixth Budget, like its predecessors, was delivered in coalition; the presence of Nick Clegg and Danny Alexander on the government front bench is a permanent reminder of how the Conservatives fell short at the last general election. As his party’s chief strategist in 2010, Osborne continues to live in the shadow of that campaign.

This political failure was followed by an economic one. Osborne’s original ambition was to eliminate the structural deficit in a single term. The collapse of growth after he entered office forced him to postpone this goal. Higher-than-forecast borrowing cost the UK its triple-A credit rating, the metric that he had adopted as the defining test of his economic credibility. Few politicians have recovered from such a gap between promise and delivery.

Osborne’s skill has been to transform this political base metal into gold. He has been the great alchemist of this parliament. The Chancellor made a virtue of coalition government by co-opting the Lib Dems’ best ideas – increasing the personal tax allowance, granting new freedoms over pensions – and aggressively rebranding them as Conservative achievements. The Tories’ junior partners protest indignantly, reminding voters that David Cameron told Clegg during the first 2010 leaders’ debate that the country could not “afford” to “take every­one out of their first £10,000 of income tax”. (Osborne's Budget increased the threshold to £10,800.) But, as Ronald Reagan observed: “If you’re explaining, you’re losing.”

When the near-disappearance of growth almost halted deficit reduction, Osborne chose not to impose additional fiscal tightening, instead redefining austerity as a two-term project. Labour has been left unsure whether to applaud the Chancellor for adopting the more moderate path it advocated (“a victory for sensible Keynesian thinking” was how his shadow, Ed Balls, recently described it to me) or to denounce him for failing on his own terms. In both cases, it has been forced to concede that it, too, would impose austerity after the election, an admission that has corroded its left-wing support. There are some Conservatives who wonder aloud whether greater deficit reduction would have been more politically hazardous, liberating Labour to promise the return of big spending.

Osborne’s greatest act of conjury, as ­fiscal boundaries have shifted, has been to entrench an image of himself as a figure of unbending constancy. Aides say that the Chancellor, whose once-poor approval ­ratings now exceed those of the three main party leaders, is congratulated by the public on “sticking to the plan” during his hard-hat tours. Like Margaret Thatcher (who was sometimes for turning), he knows that, in politics, appearance matters more than reality.

The truth is that Osborne has changed. Midway through the parliament, after the humbling experience of his 2012 “omni­shambles” Budget, he began to remake himself as a more complex and sophisticated politician. Osborne now speaks of the state as an ally as often as he does of it as an enemy and compares himself to Michael Heseltine. He has resurrected the cause of “full employment” (albeit more loosely defined than in previous decades), championed increases in the minimum wage (which will rise by 3 per cent, to £6.70 an hour, from October) and begun the construction of a “northern powerhouse” to challenge London’s hegemony. This ideological rebalancing is driven by Osborne’s Huddersfield-born, comprehensive-educated adviser Neil O’Brien, who wrote of the need for the Tories to decontaminate their brand in urban regions during his time as director of Policy Exchange. That Osborne embraced such an interesting thinker is evidence, say Tory MPs, of his intellectual restlessness, contrasting him with the dependable but unimaginative Cameron.

But like a rock star whose new album includes traditional material for older fans, the Chancellor is playing some familiar tunes. He has revived his 2007 pledge to raise the inheritance tax threshold to £1m. It was this policy that spooked Gordon Brown into abandoning plans for an early election and that earned Osborne his reputation as a strategic grandmaster. But the politics is not uncomplicated for him. If the measure will appeal to aspirational voters, the decision to prioritise the reduction of a tax paid by just 4.9 per cent of estates risks reinforcing the Tories’ status as the party of the privileged. Few policies more sharply contradict Michael Gove’s exhortation to be “warriors for the dispossessed” and to penalise “the undeserving rich”.

The Budget promised less post-election austerity than implied by the Autumn Statement, as Osborne sought to neutralise Labour's 1930s attack line. But because of his ambition of a surplus by the end of the next parliament, accompanied by no further tax rises, a fiscal chasm remains between his plans and those of Labour. Ed Balls’s decision to leave room to borrow to invest would give him nearly £30bn of additional spending each year.

It was partly the fear of massacred public services that denied the Tories a majority in 2010, in the most propitious circumstances. Osborne’s wager is that their unexpected resilience will persuade voters that further austerity is tolerable; that fear of a “tax bombshell” and “economic chaos” under Labour will predominate.

When the Tories entered office, some doubted that this question would even arise. The belief was that they would be evicted from government on a wave of popular outrage over the cuts. But the wave never came. Osborne has managed failure well indeed. 

George Eaton is political editor of the New Statesman.

This article first appeared in the 19 March 2015 issue of the New Statesman, British politics is broken

Photo: Getty Images/Ian Forsyth
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The big battle in Corbyn's Labour party will be over organisation, not ideas

Forgotten and near-moribund institutions of the parliamentary Labour party will become vital once again, explain Declan McHugh and Will Sherlock. 

“Decidedly downbeat” was Chris Mullin’s assessment of the first Parliamentary Labour Party meeting following the 2001 landslide General Election victory. Blair was “received well, but without elation … the managing director was treated to some blunt warnings that this time around the boys and girls on the shop floor expect to be treated with more consideration.”

Assuming he wins the leadership, Jeremy Corbyn’s first PLP meeting will be anything but downbeat. The ‘shop floor’ will be more akin to a Lions’ Den. Labour’s new figurehead will face a PLP overwhelmingly opposed to him. Many will question the legitimacy of his election and some will reject his authority. From day one, he will face a significant number of Labour MPs not merely against him but actively out to get him. There has probably never been a situation where a leader of the Labour Party has been so far removed from the parliamentary party which he supposedly commands.

The closest historical parallel with Corbyn is arguably George Lansbury, another ardent socialist who took charge of the party after serious electoral defeat. But the comparison doesn’t really stand up to scrutiny. Lansbury may have been on the left but he had been a leading figure at the top of the party for many years. Corbyn has never been anything but part of the Labour fringe – rarely even attending PLP meetings.

Nevertheless an immediate move to oust him is unlikely. Whatever their concerns about the circumstances of his election, the scale of the contest will make MPs nervous about executing a coup. And crucially there is no obvious alternative leader waiting in the wings.

The internal battle against Corbyn will instead be more drawn out and fought through the internal structures of the party. The number of Labour MPs showing a sudden and hitherto undiscovered interest and expertise in the PLP Standing Orders is an indication of what is to come. When Labour is in government, journalists pay little notice to obscure internal committees. Now they are going to be the centre of attention. The PLP may be energised on an organisational front in a way that it never was during the Blair, Brown and even Miliband years. Conflict is likely to be focused in the following arenas:

  • Shadow Cabinet

Corbyn is now understood to populate his shadow cabinet by appointment, but opponents in the PLP are seeking a return to the system of elections. That will not be straightforward. Although the 2011 decision to end elections was primarily achieved by means of a PLP vote to change Standing Orders, it was subsequently agreed by the NEC and passed into party rules by Conference. It will be harder to undo that constitutional knot than it was to tie it. The PLP can vote to change Standing Orders again but the NEC and Conference will need to reflect that in further amendments to party rules if the decision is to have constitutional authority. That sets the scene for a messy clash between the PLP and the NEC if Corbyn chooses to defy the parliamentary party.

 

Even if elections are restored, it is not clear how Corbyn’s opponents in the PLP will respond. MPs seeking the return of shadow cabinet elections hope to run a slate of candidates who will work to emasculate the new leader. But others have already resolved to boycott the front bench, regardless of how it is selected. Corbyn’s opponents face a dilemma. On the one hand abandoning the shadow cabinet may be viewed as walking off the pitch at a time when others are prepared to get stuck in and organised. On the other, it will be impossible to take a shadow cabinet post without signing up to some level of collective responsibility. That means undergoing the daily grind of defending the party line in front of the 24 hour media spotlight, with all statements scrutinised and recorded by Conservative researchers for future use.  How many Labour MPs would be willing to support a Corbynite line on foreign affairs, defence and economic policy? The new Labour leader will soon find out.

 

  • PLP meetings

The Monday evening meetings of the PLP are a weekly arena in which the frontbench and the party leadership are held to account by the wider parliamentary party. In the Kinnock, Smith and Blair days, although occasionally raucous, there was a degree of deference to the Leader. That has waned of late but will likely be non-existent under Corbyn. No one can remember the last time the PLP voted on a matter of policy, but Standing Orders permit it to so – expect opponents of the leadership to use this device.

 

  • PLP Chair

John Cryer, the current PLP Chair, will have his work cut out trying to manage what are likely to be stormy meetings. Moreover, the annual election of the Chair is an important barometer of the parliamentary party’s mood and the easiest means of organising a proxy vote on confidence in the leader. Importantly, the Chair of the PLP approves what motions can be tabled at the weekly PLP meeting. 

 

  • Parliamentary Committee

The parliamentary committee are effectively shop stewards for the backbenchers and the election of representatives is similarly a reflection of political sentiment in the PLP. New elections won’t happen until next May but the PLP could decide to initiate earlier elections. Labour MPs will ask whether the current committee, which includes one Corbyn nominator, is representative of the majority view. If not, a slate opposed to the leader could be organised. The Parliamentary Committee has executive powers that it rarely uses but this may change and will be significant. 

 

  • Departmental Groups

The PLP’s internal policy committees have been in decline since the early years of Tony Blair and have rarely made waves but have potentially important powers, including the right of Committee Chairs to speak from the Despatch Box. MPs may use these bodies to challenge frontbench policy positions in a way that no leader has experienced, promoting alternative agendas at odds with the leadership line on foreign affairs, defence and the economy. The Chairs have not yet been elected and this could be a key focus in the autumn.

 

  • Whips Office

The idea of Jeremy Corbyn directing the PLP to follow three-line whips is, to many, a source of amusement. A man who regularly topped the charts of rebel MPs will struggle to maintain the traditional system of party discipline – and indeed he has already indicated that he has no intention of “corralling” MPs in the traditional way. Most likely the whips will play a distinctly different role in the future, acting more as shop stewards for backbench MPs who want their concerns made clear to the Leader’s Office. And the likely deputy keader Tom Watson, who hails from the right wing union tradition but is close to some of the left, will play a major part in trying to balance the needs of the new leadership with the real anger of backbench Labour MPs.

Corbyn’s lack of authority and support within the wider parliamentary party puts a major question mark over his long term prospects as Labour leader. He would certainly lose any direct trial of strength against the PLP.

But the Corbynite group will seek to avoid confrontation inside Westminster. They believe their strength lies in the party outside Parliament and in the new influx of members and supporters. Their agenda will be to capitalise – though they might not use the term – on the leadership triumph by instituting rule changes that will revive the left within the party machine. Not just inside the NEC, the Conference and the party HQ but in the regional and constituency party organisation.

Most particularly, they are likely to seek to convert supporters into members, with a role in the selection of parliamentary candidates. By such means they will seek to apply external pressure on MPs from their own constituency parties. Labour members may be understandably wary about moving to decapitate a new leader so soon after his election. But they face a race against time to prevent him and his supporters from reshaping the party machine in ways that will undermine them from below.

 Will Sherlock and Declan McHugh are former Labour special advisers who now work at Lexington Communication.