What is going on with the Chancellor of the Exchequer? One minute it’s the sunny uplands and he’s got £27bn of spare cash to play about with, the next minute the economy is a cocktail of risks, and we must get on with austerity otherwise global economic storms will come crashing on to our shores.
He looks one way, then the other. Who is George Osborne then? Iron Chancellor gripping the nations finances by the neck? Or hyper-political Chancellor who blows hot and cold on the cuts depending on his political tactic that day?
If you don’t know by now, it’s actually the second. He is much less interested in sound finances and the working life of the average Briton, than how he can work his way into 10 Downing Street. When it comes to politics versus economics, the latter always comes off worse.
Let me explain in three steps:
1. His announcement yesterday on global risks – why did he make it now?
We are all very conscious of the risks in the global economy right now. China is seeking to normalise some of the functions of its markets. But it is a huge economy, and if they get it wrong, the scale of the problem could be way too large for the rest of the world to deal with. The risks are very serious. Added to this, the US has just raised interest rates for the first time since the crash. It is difficult to foretell what impact this might have on the rest of us. And in economic terms, there is little worse than uncertainty, which puts off investors and scares people away from taking the kind of healthy risks that produce future growth.
As shadow treasury minister over the summer, I wrote of the risks ahead for Britain given global economic turbulence.
But if Osborne was really concerned he too could have been talking about this well before now. And he could have been taking action – pausing his cut to inheritance tax for example, or embarking on faster infrastructure investment in the worst off parts of the UK – but he hasn’t.
So what was yesterday really about? My view is that it’s the Chancellor getting his excuses in early. Just as he blamed the eurozone for his failure in the last parliament, he’s looking to blame the wider economy for his cock-ups in this.
And why does he need this? That’s step 2:
2. He has not fixed the deficit
When he became Chancellor in 2010 George Osborne set himself one principal economic challenge- to eliminate the UK’s budget deficit by 2015. His abject failure to meet this objective is the story that should define his inglorious stint at the top of British politics.
We are now in 2016, the deficit is still an eye-watering £73.5bn and is not expected to return to zero until 2019/20. Plenty of experts doubt Osborne’s ability to even meet these cautious expectations. Given his excuse-making this week, it seems the Chancellor himself is having doubts.
3. Because he only cares about the few not the many
Why? Osborne would love to say it’s just because he’s faced economic headwinds. First it was the eurozone, now it’s the Chinese economy, next week it will be something else. But if these threats are so immediate and some belt-tightening is needed then there are plenty of ways he could demonstrate that he is serious about this.
He could reverse his cut to inheritance tax which hands a big pile of cash to a tiny number of wealthy people. He could recoup hundreds of millions of pounds by cancelling his cut to corporation tax given that we already have a competitive rate and further reductions are unnecessary. He could scrap the pointless and economically illiterate marriage tax allowance which seems to be simply an expensive method of generating good headlines in the Mail. Most radically, he could stop his policy of continually raising the personal allowance given that it will no longer benefit the lowest paid who are already outside the income tax bracket.
These are all – every one – policies that benefits the best off most. They are not austerity, they are ‘let the good times roll’ cash bungs to the wealthy in order to shore up his place in the succession line to be Tory leader.
Ah, you might say, but he u-turned on tax credits. Surely that shows it’s not all just about tax breaks for the top?
Well sure, I’m glad he’s given families a temporary respite. But the fact is if he really believed what he announced at the budget – that he could make families better off merely with the new minimum wage rate – he would have stuck to his guns. But as Gordon Brown explained so well in his speech at Child Poverty Action Group’s 50th anniversary, it’s just not possible.
No, he u-turned because not because of any of his economic concerns. It was pure politics. People will face the cuts anyway when universal credit comes in. But Osborne will be long gone by then.
With Osborne it always, always, is short term politics above long term economics.
So when you hear him argue about tightening our belts and the need for austerity because of the cocktail of risks. Ask yourself this. Who is this message for? Is it for the bankers, who have just seen the FCA cancel a vital enquiry into the culture that lead to the crash? No. Is it for big corporations who’ve seen corporation tax cut year after year? No. Is this message for local authorities in wealthier areas, who are taking nothing like the cuts that poorer boroughs must deal with? No again.
No, it’s for ordinary working British people to tell them to be afraid. That they must put up with the cuts and council tax hikes, because of the global headwinds.
It’s not a cocktail of risks, it’s a cocktail of tricks.
Well I say this, George. If you are so worried about global headwinds, cancel your inheritance tax cut. Do away with your marriage tax allowance. Tell big corporates that we won’t be a tax haven and they can’t have their cut.
Nope. It’s not going to happen is it? Which is why I wonder, how can our country trust a man who has failed so often, and served a few, rather than the many? I worry that turbulence in the Labour movement is letting Osborne off the hook. But that must not happen. We must be clear that Osborne has failed every test he set himself, but more importantly, the one that the British people rightly set him: to put them first, and to make them better off.