Amid this week’s torrent of encouraging economic news – strong PMI data, swashbuckling growth forecasts, resounding poll leads – one question has bobbed to the surface. How does the Tory leadership make sure that an improved economy doesn’t scupper their own chances? How does it guard against voters thinking “kthxbai,” and just going off to vote Labour for the times of plenty?
In fact, the answer isn’t all that complicated. It rests on a natural split between the wider economy and the public finances that was implicit within George Osborne’s speech this week. The economy can continue to improve, but Britain’s fiscal position will be inadequate for some time to come. Hence why Osborne’s new target is to achieve a budget surplus within the next Parliament. The intimation is that, though growth has returned, the job is only half-way done – and Labour can’t be trusted to see it through.
Of course there are various nuances to this story. As I’ve said before, the national recovery may be too dependent on house prices and cheap money, as well as covering-up continued local downturn. And, even if the deficit steadily improves in the next Parliament, there is still the immense national debt that, by the Institute for Fiscal Studies’ calculations, won’t settle to pre-crisis levels until around 2032-33.
But, as politics doesn’t trade in nuance, it will mostly come down to two, differing trajectories. Fast-rising growth, for which Osborne will claim credit. And slow-declining borrowing, for which he will demand time.
Which is why, in the next few years, we’ll read plenty more news stories like today’s about Jeremy Hunt and NHS pay. Apparently, the Health Secretary is motioning to prevent a 1 per cent pay-rise for NHS staff that is currently scheduled, per the terms of Osborne’s budgeting, for next year. The Guardian adds, “The health secretary claims the NHS’s £100bn annual budget is under such pressure that it cannot afford to increase salaries at all in 2014 or to continue to give staff automatic increments.” That’s certainly one way of pointing out that we’re all still living in Austerityville.
But that just brings us to another question that is more difficult to answer: what happens if – as I’ve suggested before – Osborne mines the growing economy for some pre-election tax cuts and spending giveaways? Will he try to placate those NHS staff then? Or will he risk incurring even more of their wrath?