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

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Is defeat in Stoke the beginning of the end for Paul Nuttall?

The Ukip leader was his party's unity candidate. But after his defeat in Stoke, the old divisions are beginning to show again

In a speech to Ukip’s spring conference in Bolton on February 17, the party’s once and probably future leader Nigel Farage laid down the gauntlet for his successor, Paul Nuttall. Stoke’s by-election was “fundamental” to the future of the party – and Nuttall had to win.
 
One week on, Nuttall has failed that test miserably and thrown the fundamental questions hanging over Ukip’s future into harsh relief. 

For all his bullish talk of supplanting Labour in its industrial heartlands, the Ukip leader only managed to increase the party’s vote share by 2.2 percentage points on 2015. This paltry increase came despite Stoke’s 70 per cent Brexit majority, and a media narrative that was, until the revelations around Nuttall and Hillsborough, talking the party’s chances up.
 
So what now for Nuttall? There is, for the time being, little chance of him resigning – and, in truth, few inside Ukip expected him to win. Nuttall was relying on two well-rehearsed lines as get-out-of-jail free cards very early on in the campaign. 

The first was that the seat was a lowly 72 on Ukip’s target list. The second was that he had been leader of party whose image had been tarnished by infighting both figurative and literal for all of 12 weeks – the real work of his project had yet to begin. 

The chances of that project ever succeeding were modest at the very best. After yesterday’s defeat, it looks even more unlikely. Nuttall had originally stated his intention to run in the likely by-election in Leigh, Greater Manchester, when Andy Burnham wins the Greater Manchester metro mayoralty as is expected in May (Wigan, the borough of which Leigh is part, voted 64 per cent for Brexit).

If he goes ahead and stands – which he may well do – he will have to overturn a Labour majority of over 14,000. That, even before the unedifying row over the veracity of his Hillsborough recollections, was always going to be a big challenge. If he goes for it and loses, his leadership – predicated as it is on his supposed ability to win votes in the north - will be dead in the water. 

Nuttall is not entirely to blame, but he is a big part of Ukip’s problem. I visited Stoke the day before The Guardian published its initial report on Nuttall’s Hillsborough claims, and even then Nuttall’s campaign manager admitted that he was unlikely to convince the “hard core” of Conservative voters to back him. 

There are manifold reasons for this, but chief among them is that Nuttall, despite his newfound love of tweed, is no Nigel Farage. Not only does he lack his name recognition and box office appeal, but the sad truth is that the Tory voters Ukip need to attract are much less likely to vote for a party led by a Scouser whose platform consists of reassuring working-class voters their NHS and benefits are safe.
 
It is Farage and his allies – most notably the party’s main donor Arron Banks – who hold the most power over Nuttall’s future. Banks, who Nuttall publicly disowned as a non-member after he said he was “sick to death” of people “milking” the Hillsborough disaster, said on the eve of the Stoke poll that Ukip had to “remain radical” if it wanted to keep receiving his money. Farage himself has said the party’s campaign ought to have been “clearer” on immigration. 

Senior party figures are already briefing against Nuttall and his team in the Telegraph, whose proprietors are chummy with the beer-swilling Farage-Banks axis. They deride him for his efforts to turn Ukip into “NiceKip” or “Nukip” in order to appeal to more women voters, and for the heavy-handedness of his pitch to Labour voters (“There were times when I wondered whether I’ve got a purple rosette or a red one on”, one told the paper). 

It is Nuttall’s policy advisers - the anti-Farage awkward squad of Suzanne Evans, MEP Patrick O’Flynn (who famously branded Farage "snarling, thin-skinned and aggressive") and former leadership candidate Lisa Duffy – come in for the harshest criticism. Herein lies the leader's almost impossible task. Despite having pitched to members as a unity candidate, the two sides’ visions for Ukip are irreconcilable – one urges him to emulate Trump (who Nuttall says he would not have voted for), and the other urges a more moderate tack. 

Endorsing his leader on Question Time last night, Ukip’s sole MP Douglas Carswell blamed the legacy of the party’s Tea Party-inspired 2015 general election campaign, which saw Farage complain about foreigners with HIV using the NHS in ITV’s leaders debate, for the party’s poor performance in Stoke. Others, such as MEP Bill Etheridge, say precisely the opposite – that Nuttall must be more like Farage. 

Neither side has yet called for Nuttall’s head. He insists he is “not going anywhere”. With his febrile party no stranger to abortive coup and counter-coup, he is unlikely to be the one who has the final say.