• OSBORNE HoratiusIn last week’s autumn statement, George Osborne set a Deficit Trap for Labour.  “We will look to see whether the five year time horizon of the fiscal mandate could be shorter and even more binding now that the public finances are closer to balance,” he told the Commons. “And we will see how fiscal credibility could be further enhanced by a stronger parliamentary commitment to the path of consolidation already agreed for 2016-17 and 2017-18. The answers will be written into an updated Charter for Budget Responsibility which will be presented to Parliament a year from now and voted upon.”  In other words, the Commons will get to vote on the Government’s future spending plans, thus forcing Ed Miliband and Ed Balls to make a decision about which lobby to go through, if either.  Labour will have to choose between voting with the Government, thus moving to close down their poll weakness on economic management but enraging their base, or vote against it, thus doing the opposite (or else seek to duck the issue by abstaining).  Balls will be plagued by the unions and Labour MPs lobbying him to vote against the plans.
  • Osborne also set a Welfare Trap for Labour.  “So from next year, we will introduce a new cap on total welfare spending…so we won’t include the state pension, which is better controlled over a longer period. We will also exclude from the cap the most cyclical of benefits for jobseekers. All other benefits – from tax credits to income support to the vast majority of housing benefit will be included in the cap. At the beginning of each Parliament, the Chancellor of the day will set the welfare cap for the coming years and ask the House of Commons for its support,” he said.  In other words, the “automatic stabilisers” won’t have the cap applied to them.  How the plan will apply to other benefits and credits raises some interesting questions –  and, strictly speaking, the vote on it may never happen, since the Conservatives may not hold office after 2015, and Labour would be sure to scrap the measure rather than risk a stand-up row with its Left in the Commons.  But the Chancellor is sure to find ways of forcing votes on the cap in the Chamber – thus presenting Balls, who grasps Labour’s exposed position on welfare, with another headache.

My former boss, the Chancellor, has his weaknesses.  He meddles too much in whipping.  Wealth and power exercise an unattractive pull on him, a flaw exposed during the Deripaska controversy.  If he had his way, there would be nothing in the tax system for marriage.  As a social liberal, he under-estimates its importance to better opportunities and social mobility.  He must take a share of the responsibility for the same-sex marriage fiasco – the worst piece of Government handling of a sensitive electoral issue that I can remember.  And, as the effective co-leader of the Conservative part of the Government, he is partly to blame for the arrogance and aloofness that has mangled its relationship with Conservative MPs and activists.  He messed up the 2012 budget by robbing too many Peters to pay Paul: had he not jollied off to America the week before, he might have spotted the error.

None the less, many of the criticisms laid at his door are unfair.  He is blamed for not cutting the deficit faster.  But the Right has been collectively frivolous about cutting spending.  Tory MPs may call for cuts in theory, but try making them in practice, and see how they flock to the Chamber to defend their constituents’ short-term interests.  (There are a few splendid exceptions, such as Dominic Raab, who has proposed culling entire departments.)  Conservative newspapers and magazines may clamour for deeper retrenchments, but I’m not aware of a single publication, other than ConservativeHome, that has ever dedicated a week to how to cut public spending.  And since he is the Chancellor in a Coalition Government, he scarcely has two free hands.  Even so, he is reducing the rate of increase faster than Margaret Thatcher did.

It is also wrong to see him simply as a creature of tactics – a politician who is fixated with wrong-footing his opponents, to the exclusion of doing what’s right for the country.  He was quick to grasp that fighting the last election on a platform of reducing the rate of spending might cost the Conservatives victory in 2010, telling aides before his speech to the 2009 conference that it could lose his Party the election.  (He was also more consistent than David Cameron in sticking to the austerity message during the run-up to the poll.)  Osborne also knew that to cut the top rate of tax would be controversial.  None the less, he believed it was the right course to take.  Furthermore, many of his biggest judgement calls have been right.  He may have saved the Party from election defeat in 2007, when his conference call for tax cuts in stamp duty and inheritance tax turned the polls round almost overnight.

There is no evidence that the economic recovery will transform Britain’s economy into a German-type one, built on investment and exports rather than yet another housing and consumer boom.  But Plan A Minus – that’s to say, squeezing the rise in spending over a long period – is working, restoring business confidence (which a fourth Labour Government would have wrecked) and delivering rapid growth.  And the Chancellor has usually been on the right side of the economic argument in Cabinet.  You may not like his nuclear power deal, but at least decisions are being made after decades of dithering.  He is pro more runways and more shale. He is anti green levies that hit the consumer (though the worst one of all, the Carbon Price Floor, is a Treasury revenue-raising wheeze.)  He must consistently fight off spending Ministers whose pleas would be a collective disaster for fiscal discipline.

He has cut corporation tax.  He has helped to drive the skills and apprenticeships reforms undertaken by John Hayes and Matthew Hancock, though it is far too early to know whether they will truly deliver results.  He understands the importance of housing and jobs to the Conservatives’ electoral future, which is why he ended his autumn statement by cutting taxes on employment for young people – rightly praising Lottie Dexter, one of the lead contributors to this site’s Homes Jobs & Savings push, for her Million Jobs Campaign.  He could not responsibly have let the bill for Universal Credit go through the ceiling, even though, as Peter Hoskin pointed out recently, the Treasury’s money-saving drive will weaken the scheme’s effectiveness in reducing disincentives to work.  But it is Osborne who has come up with the most popular welfare policy of all – the cap.

A week on from his autumn statement, I can’t help admiring the way in which, almost alone (but for Michael Gove and, in his way, Eric Pickles), the Chancellor keeps taking the fight to the opposition – relishing the mix of Parliamentary chess and kung fu that puts Ed Miliband on the back foot; dreaming up deficit and welfare traps for Balls; seeking at every turn to find new means of ramming home Labour’s weaknesses on spending and welfare.  Carla Millar portrays him above as Horatius at the bridge, holding his political opponents at bay.  The tribute is deserved.  I add a bitter-sweet footnote.  According to some accounts, Horatius was badly wounded during the heroic episode, and unable afterwards to hold public office.

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