George Osborne has not had the ideal time as Chancellor. That isn’t his fault – rather, the circumstances into which he was plunged in 2010 forced his hand. Faced with a vast deficit, and a state geared up by Labour for that deficit to increase, he had to spend the first five years of his tenure placing deficit reduction above all other concerns. We may debate at another time how he went about that task, and whether his decisions or the political pressures of Coalition hindered its progress, but there’s no doubting he chose rightly to take on unsustainable levels of borrowing.
The deficit still exists, albeit at a much lower level than in 2010, but the Chancellor’s recent Autumn Statement and Budget indicate that there are new priorities at play. For good or ill, when presented with money “found” by the OBR, he chose to use it for other things, rather than as a bonus on the road to eliminating the deficit.
Osborne recently wrote for this site about the four major changes which have come into effect over the last week:
- The National Living Wage;
- The new savings allowance, and finance ISA;
- Increasing the income tax threshold to £11,000 and increasing the higher rate threshold to £43,000;
- The single-tier pension.
Our concerns about the impact of the first on job creation and on small businesses in particular are well-documented. Help for savers is something this site has long called for, and is a welcome help to those doing the right thing. Further rises to income tax thresholds will be welcomed by many, but as the ConHome manifesto laid out we would prefer the priority to be raising the Employers’ National Insurance threshold, starting with NI charged on employing under-25s. The pension changes will be popular with those who gain from them (which is not everyone, as the IFS has warned this week), but we must ask whether more money for pensioners is the right priority, given that the old now have more disposable income than the young.
As Paul wrote after the 2015 Autumn Statement, there are some troubling signs that the new era of Osborne’s Chancellorship is driven primarily by the consideration of how to secure the leadership of the Conservative Party. That may be a natural reaction to circumstance, as his focus on deficit reduction was a natural reaction to the crisis the public finances faced in 2010, but unlike that previous reaction this is one of personal choice rather than national necessity.
While the National Living Wage is certainly a momentous moment and action to support savers is very welcome, there are still few signs of the Chancellor taking on the huge issues that face the nation. Not only is the deficit still there (and set to remain with us, given the OBR’s latest forecasts), but the huge questions about intergenerational fairness, productivity and export performance are yet to be properly answered, and the economy as a whole is still operating under supposedly emergency interest rate conditions.
Meanwhile, circumstances have again dictated Osborne’s priorities – raising the distinct possibility that we may never get to see what kind of economy he would build if the choice was his alone, with a fair wind and no storms looming on the horizon. If there is a greater Osbornism underlying the Chancellor’s actions, Britain is yet to discover what it is.