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25 November 2015

George Osborne’s double U-turn allows him to change while remaining the same

The Chancellor abandoned cuts to tax credits and the police but stuck to his target of a £10bn budget surplus. 

By George Eaton

The U-turn is an underrated manoeuvre in politics. At a stroke, it reduces opponents to complaining that the government has done what they told it to do. As long as the U-turn is in the right direction, the voters, who pay little attention to such inconsistencies, are usually content.

The best climbdowns are often the fullest. In his Autumn Statement and Spending Review, George Osborne proved this not once but twice. As so often, the Treasury briefings that the Chancellor would merely provide “transitional” support for tax credit claimants were designed to lead reporters off the scent. Rather than modifying the cuts to in-work benefits, Osborne abandoned them entirely. In the face of the formidable coalition of Boris Johnson (his chief leadership rival), Tory backbenchers, the Sun, the work and pensions select committee, Labour, the SNP, the Liberal Democrats and the Adam Smith Institute, he capitulated.

He did so at the cost of breaching his self-imposed welfare cap for three years. But this will only have the effect of symbolising his generosity. In fact, the cuts have merely been deferred (till 2020 as tax credits are absorbed by Universal Credit), rather than abandoned. But today at least, the Chancellor has got the headlines he wanted. 

After the Paris attacks, another formidable coalition of interests had inveighed against police cuts. And again, Osborne met their demands in full. Having suggested as recently as last weekend that there would be signifcant cuts (another bluff), he revealed in his peroration that there would be none at all. In doing so, he denied Labour its strongest riposte to the Tories’ branding of themselves as the party of “security”. “The police protect us, and we’re going to protect the police,” he declared. Just as his tax credits U-turn shielded him from one leadership challenger (Boris), so this move shielded him from another (Home Secretary Theresa May). The Foreign Office budget, he also announced, would be protected in real-terms, joining health, international development and defence behind the ring-fence. 

The skill of Osborne’s statement was to change while remaining the same. Against expectations, he announced that his promised budget surplus in 2020 had not fallen but risen to £10.1bn (up £0.1bn). Gross tax increases of £28.5bn, including the new apprenticeship levy (£11.6bn), higher council tax (£6.2bn) and higher stamp duty for second homes and buy-to-let purchases (£3.8bn), as well as lower debt interest payments mean that he is still forecast to eliminate the deficit (albeit years later than originally promised). Fixing his gaze at John McDonnell, he vowed that the Tories would “fix the roof while the sun is shining” (the shadow chancellor having told me that he would “throw up” if he heard the line again). 

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But Osborne’s decision to avoid the most hazardous cuts should not distract from those that remain. The average cut to unprotected departments, including transport, business and communities and local government – is 19 per cent. After the reductions in the last parliament, any fat has largely been excised. The Chancellor will be cutting into bone. If past experience is any guide, today’s U-turns will not be his last. But as history shows, and Osborne knows, that may not be to his cost. 

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