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10 March 2017

How George Osborne accidentally laid a trap for his own government

The former Chancellor's political gameplaying has ensnared his successor. 

By Stephen Bush

One of the things that George Osborne prided himself on as Chancellor was his ability to set traps for his external opponents. The Conservatives’ 2015 manifesto was full of them. It set out a timetable of cuts to welfare spending designed to discomfort Labour, and a series of pledges on tax – no rises in income tax, value added tax, or National Insurance – both intended to clobber Labour and to force his expected coalition partners, the Liberal Democrats, to carry the can for tax rises. He even boasted to one senior Liberal Democrat that they would “make” him raise taxes.

Unfortunately, things didn’t quite work out as he planned. The Conservatives won an outright majority, and a mandate to implement their manifesto. It swiftly became apparent that you couldn’t cut welfare spending without hitting into payments that were enjoyed by Tory voters, and the resulting row over tax credits holed Osborne’s chances of becoming Prime Minister under the waterline even before the referendum sunk the ship entirely.

Now the trap he laid on tax has his successor, Philip Hammond, in its grasp. To add to Hammond’s misery he has also strengthened the bars of the cage by throwing in a pledge not to fund the cash injection needed for social care with an inheritance tax.

The Conservatives have made a bizarre virtue of tying their hands. They can’t increase income tax or VAT without changing the law and breaking their manifesto promise and there isn’t a parliamentary majority to do so anyway. As the row over national insurance contributions shows, there isn’t a majority to be found among Tory MPs for taxes that hit “their people”, just as the row over tax credits showed there isn’t one to found for cuts that hit their people either. So that rules out increased property taxes.

Separately the government has pledged to keep corporation tax at the lowest in the G7 so that revenue-raiser is off the table as well.  This is at the same time that the increase in the minimum wage increases the financial pressure in the public services as well.

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Of course this all comes with the major caveat that, as both the polls and by-elections to both Parliament and local authorities show, the government is on course to be re-elected with a thumping majority in 2020. But unless Theresa May can find an excuse to go to the country early and a way to get around the Fixed Term Parliaments Act, neither of which are easy, the best case scenario for the Conservatives is that are headed for a period of what you might call “zombie hegemony”, unable to lose power but unable to wield it either.