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Conference 4

Let me tell you, bud: when you sit down to read all of George Osborne’s Budgets, you too will take pleasure in the smallest of mercies. For me, it was just how plain they are. They don’t carry the gross subheadings that prevailed under New Labour – e.g. “Stability and opportunity: building a strong, sustainable future” – but are simply called “Budget 2012” or “Autumn Statement 2014”. They don’t have photographs of families and diggers on their covers, but are elegantly shaded red or green. And they don’t crush your spirit with their bulk, but average a modest 120 pages in length. They are altogether more endurable than what came before.

But putting my sensibilities aside, this plainness is an important virtue. Back when Gordon Brown was in power, Budgets used to be an exercise in subterfuge: he’d establish fiscal rules and then gerrymander the numbers to the point where those rules meant nothing. Whereas now, thanks to Osborne, each Budget has to be certified by the Office for Budget Responsibility. This organisation’s forecasts may not always be right, but at least they are isolated from the political demands of Downing Street and therefore honest. If the current Chancellor is set to contravene his own fiscal rules, then the OBR will say so in its supplementary Budget documentation – and has.

This doesn’t mean that Osborne’s Budgets are devoid of politics. Far from it. The OBR provides the numbers, but they do not provide the policies, speeches and overall salesmanship. This is where the Chancellor has thrived, going all the way back to the first Budget he delivered, in June 2010. That, you’ll remember, was the “emergency” Budget; so called not just because of the peril facing our public finances, but also because it suited the new Government to have it seen that way. They knew then that deficit reduction would be major task of this Parliament. They had to set the right tone from the off, or it would be more difficult later on.

Even now, after years of deficit-deficit-deficit, the single-mindedness of that first Budget still stands out. It’s there in the prose, which claims that “the most urgent task facing this country is to implement an accelerated plan to reduce the deficit.” And it’s also there in the policy, specifically in the two fiscal targets that Osborne set for himself. These targets were not, as I’ve explained before, as meaningful as we were encouraged to believe. But they did express some sort of meaning. They said to the credit rating agencies and the voting public alike: don’t worry, the professionals are here.

This air of confidant professionalism defined the first phase of Osborne’s Chancellorship. It ran through the Spending Review of 2010 and the Budget of the following year. And it sustained itself on the OBR’s sunny forecasts, which suggested that both the deficit and debt targets would be hit a year early. There were other policies around this time, of course: Budget 2011, with its various measures to curb the cost of fuel, could be identified as the start of Osborne’s transformation into White Van George. Yet, more than this micro stuff, the overwhelming emphasis was on the macro concerns of deficit reduction and gilt yields and credit ratings. The Coalition was, to use that old Lib Dem slogan, winning here.

It is hard to pinpoint when this phase ended. It was more of a gradual demise. As the economic-recovery-that-was-expected turned into the economic-slump-that-was-feared, it began to look less likely that Osborne’s plan would proceed smoothly. By August of 2011, even I was warning – in an article for the Times (£) – that he could fail to have the national debt falling as a share of the economy by 2015-16. A few months later, the Autumn Statement was similarly gloomy: “the UK economy has been hit by a series of shocks which have significantly weakened the economic and fiscal outlook.” Neither of the fiscal targets had yet been missed, but there was a new and awful expectation that they would be.

And then: Budget 2012. Goodbye air of professionalism. Hello fog of incompetence. This is surely the most well-known of all Osborne’s Budgets, but not in a good way. Thanks to its taxes on pasties and grannies, and perhaps (depending on your politics) its tax cut for top-rate payers, it propelled the word “omnishambles” into the national lexicon, and plunged the Conservative Party further down in the opinion polls. The Chancellor’s team have certainly been more careful about formulating policy ever since.

Yet, despite all of that, I’d still award the title of “Most Significant Budget of 2012” to that year’s Autumn Statement. In fact, aside from his first Budget, it is probably the most significant of Osborne’s time in Number Eleven. This was, after all, when the OBR finally predicted that he would miss one of his fiscal targets. According to their central estimates, the national debt wouldn’t be declining as a percentage of GDP in 2015-16. It would do so a year later. A year too late for the Chancellor.

But the real significance of that Autumn Statement wasn’t in the simple fact of a target missed, but in the revelation that Osborne was prepared to miss it. When I wrote my article for the Times, I assumed that he wouldn’t want to do that. He had placed so much emphasis on the sanctity of Britain’s triple-A credit rating, and on what it said about his deficit reduction plan, that I thought he wouldn’t risk losing it. “The only option,” I said then, “is to go further in controlling the public finances.” But here, a year later, was Osborne replying: to Hell with that. He chose embarrassment over more spending cuts and tax rises.

This is what I’d call the second phase of Osborne’s Chancellorship. It was a period of dourness and doggedness. The economy was stunted, tax receipts were just as bad, the Tory backbenches were in a state of quivering disgruntlement, and yet the Chancellor didn’t really alter his plan – even if it meant missing one of his targets. The calculation was, I’m sure, that the public wouldn’t tolerate more pain in pursuit of something as abstract as a declining debt-to-GDP ratio. But the Tory leadership may also have also have reckoned that, with Eds Miliband and Balls struggling for economic credibility, they just didn’t have to try so hard.

There was one notable change in Osborne’s approach during this time: he began to prioritise spending that would help boost the economy. Ahead of his Autumn Statement in 2012, the Chancellor asked ministers to find further savings in their departmental budgets, and then hand over the cash so that it could be spent on infrastructure projects instead. He then repeated the trick in the following year’s Budget. This was his way of rectifying one of the Coalition’s original sins: the decision to match Alistair Darling’s planned cuts to capital expenditure. Britain could build itself out of its economic torpor.

This hi-vis eagerness for hi-vis building projects has persisted to today. And so has the more laid-back attitude towards those fiscal targets. But the difference now is that growth, proper growth, has returned, and with it some of the confidence of the early days. Osborne’s Budgets now cast their certainties far into the next Parliament. The structural deficit will, according to a new target, be eradicated by 2017-18. There will be £15 billion spent across five years on Britain’s roads. There will be another £10 billion of efficiency savings. And if that doesn’t persuade you, there will be some sweeteners in the meantime.

Will, will, will. This is the refrain of the third phase of Osborne’s Chancellorship, of which last week’s Autumn Statement was an exemplar. And it is also, I suppose, the refrain of any election campaign. All politicians make promises when there are votes at stake. But the Chancellor still ought to be careful: in politics, there is not always a way where there is a will.

The great question that hangs over Osborne’s future Budgets, however many he delivers, is whether they will be dragged into a fourth phase. The Chancellor would no doubt like to carry on as he is, and hopefully eliminate the structural deficit a few years into the next Parliament. But what would he do if the world prolapses into another slump? Would he give up on his new target? Or would he cut spending and raise taxes to meet it? According to my own forecasts, conducted with the aid of tea leaves, you can look for the answers in Budget 2016.

35 comments for: The story of Osborne’s Chancellorship, as told by his Budgets

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