There’s a new parlour game for the politically-inclined. It’s called “What Was the Low Point of George Osborne’s Chancellorship?” Was it the time he taxed pasties and grannies in the same Budget? Was it his shakeable decision to cut tax credits last summer? Or was it when a photographer caught one of his fingers sticking out at an unfortunate angle?
For me, one answer stands out above all the others. It was his last Autumn Statement. This, you’ll remember, is when the Office for Budget Responsibility gave Osborne a wonderful gift: a fiscal position that, thanks to higher-than-expected tax receipts and lower-than-expected debt interest, was £27 billion healthier than they had previously calculated. But what did the Chancellor do with it? Instead of reducing his borrowings at a faster rate, he opted for profligacy. Almost £19 billion of the sum was blown on tax cuts and spending increases.
This was profligacy of a sort, and on a scale, that Osborne hadn’t really indulged in before. Sure, the pace of deficit reduction was slowed during the last Parliament, but this was mostly because of the economy rather than the Chancellor, who stuck to his spending cuts as growth and tax revenues slumped. In this Parliament, however, he has decided to reverse his spending cuts as growth and tax revenues strengthen, and let the deficit persist for longer than it would otherwise. The man is more to blame than the machine.
I mention this because something similar could happen again. With the next Budget just a month away, yesterday’s Times reported (£) that Osborne could benefit from another £20 billion windfall, brought about by “tumbling government borrowing costs and lower-than-expected inflation”. This lucky Chancellor keeps on getting more money to play with. The question is: how will he play with it? Deficit reduction or deficit denial?
Osborne may be tempted, once again, to choose the latter option. He may feel that he has enough leeway to do so. For starters, the latest forecasts have him on course to reach his target of achieving a surplus by 2019-20. For seconds – and perhaps more significant to this most political of creatures – there are few votes to be lost even if he fails. There might even be some to be gained.
One of the lessons of the last Parliament was that the Conservatives really have to screw up wholesale to lose credibility on the economy. For a long time, growth just wasn’t happening, the deficit kept on keeping on, our vaunted credit ratings were under constant threat, and yet, against Eds Miliband and Balls, Cameron and Osborne were still always regarded as the best option. That goes doubly so now that Jeremy Corbyn is running the official Opposition. There won’t be much fire from across the despatch box if the Chancellor is profligate rather than prudent, and what little there is will patter harmlessly off his suit.
But politics shouldn’t guide the public finances. Good sense should. This is what was absent from Osborne’s Autumn Statement, and what will also be missing from the Budget if he goes the same way. With oil prices plummeting, the Chinese economy palpitating, and the Eurozone still the Eurozone, this is no time for complacency about our deficit and its attendant debt burden. They can rise as well as fall, or at least not fall as fast as the Chancellor intends. The Institute for Fiscal Studies observes in its latest Green Budget, published a couple of weeks ago:
“Together, the risks to revenues and to spending, combined with the OBR’s central estimate of a surplus of (only) 0.5 per cent of national income in 2019–20, suggest that there is a significant chance that the government’s current fiscal plans will not deliver the targeted surplus in that year without further tax rises or spending cuts.”
So, Osborne needs to be kept in line, but who will do it if not the Labour Party? There’s a reason I quoted the IFS above, for they and their Green Budgets are part of the answer. In the absence of an official opposition, the presence of an unofficial one becomes all the more important. Think-tanks, watchdogs, journalists and bloggers will all have to do the work that Corbyn cannot.
A lot of this work isn’t oppositional in the usual sense. It is analytic rather than antagonistic. It simply points out what is. Even an organisation that Osborne established, the institutionally objective Office for Budget Responsibility, belongs in this merry band. We know that the Chancellor blew almost £19 billion of his recent £27 billion windfall because they told us so in black-and-white. They provide facts that the rest of us can then disseminate.
Thankfully, this sort of opposition is stronger and noisier than ever before. Put it down to the Internet and social media, if you like, but the fundamental cause is greater interest. Part of the reason why Gordon Brown could get away with his mismanagement of the public finances is that, back then, so few people actually cared. IFS briefings were sad and slender affairs in unventilated basements, whereas now they pack out immense halls. The cyclically-adjusted current budget has gone mainstream.
Yet if we really want Osborne to be moved by this opposition, then more of it must come from his own side. Conservative MPs have to put aside their preoccupation with Europe – or, in some cases, their slavish anticipation that the Chancellor will become Prime Minister – and challenge Number 11. They have a brilliant example in the form of Andrew Tyrie, who has occupied the chairmanship of the Treasury Select Committee with distinction.
As for ConservativeHome, we have tried to contribute to the unofficial opposition – our editor’s immediate response to the Autumn Statement was that it was “a gamble that Osborne should not have taken” – and shall continue to do so.
I say none of this as an out-and-out detractor of the Chancellor. In fact, up until the horror of that Autumn Statement, I was more and more impressed by him. With his Northern Powerhouse and his Living Wage, he is one of the few politicians with an actual plan for invigorating the country.
But he also needs saving from his baser political instincts. The Conservatives made a great promise in their manifesto, and in the manifesto before that, to reduce the deficit to naught. That’s not worth jettisoning, or even risking, just because Corbyn offers all the resistance of a vacuum.