The chancellor's speech set out a coherent and often radical plan for changing Britainby Bronwen Maddox / October 15, 2015 / Leave a comment
The chance to build a bridge and point to it after you’ve left office—that is the kind of thing that US senators sometimes say gives them the best job in American politics (with more practical power than the President). The clunky refrain “we are the builders” with which George Osborne hammered home his speech to the Conservative Party conference is not a high point of modern political rhetoric, but it has its uses: he’s offering a very tangible legacy, built before your eyes.
The central planks of the Chancellor’s speech set out ambitious goals for a modern country—and for modernising it further. More devolution of power to cities and councils, enabling them to compete for businesss; more apprenticeships; and a commitment both to defence and aid. The tone was international, confident, often radical, not invoking Broken Britain but acknowledging a list of problems which he proposed practically to fix.
The question will now be whether the Chancellor can deliver on the construction contract he has written, as well as on the wider goal he shares with David Cameron of seizing the centre ground of British politics, or whether he will be tripped up both by the severity of the cuts he proposes and by economic factors beyond his control.
The building pledges themselves are not without hazard. Houses are almost the easiest, given the consensus behind the need (see our cover story, by Andrew Adonis, the Labour peer last month). Sceptical mutterings that money for the Northern Powerhouse might never appear may have been dispelled, at least for now, by the publicity of Osborne’s commitment.
But he left the case for his proposed new National Infrastructure Commission undeveloped; the most substantial thing about it is Adonis, lured from the Labour benches to be its first chairman (becoming a crossbencher in the process). Without money, it can do little, except evaluate projects to be run by Whitehall and paid for by private money, often foreign. The aim is presumably that it gives impetus and endorsement to projects, including the most controversial (and Adonis is firmly in favour of HS2). But as John Kay’s demolition job on Howard Davies’s and the Airport Commission’s economic modelling shows (p42), the quality of advice given to governments can be poor, concealed by over-specific models which pretend to a confidence about the future that no one can sensibly hold. That is an affliction which tends to find a natural host in bodies such as national infrastructure commissions.
Osborne’s vulnerabilities are clear. Boris Johnson noisily joined David Davis’s challenge to the speed of the proposed removal of tax credits for those on low pay. It’s probably hyperbole to say, as Davis did, that it could provoke public reaction like the poll tax, but it might well be like the response to Gordon Brown’s ill-fated abolition of the 10p tax band. Combined with measures after the election to lift inheritance taxes, it gives ammunition to those who say the Conservatives protect the well-off when sharing out the pain of cuts. The question now is whether Osborne will, in the Autumn Statement, ease up on these cuts if growth continues; there is a strong case that he should.
But growth may weaken, and the effects of China’s slowdown are a wild card. While Treasury officials say that recent revenues have been surprisingly strong, there is concern over the current account deficit—the gap between what Britain imports and what it exports. Far from building and making lots of goods, Britain is exporting services, such as finance, and continuing to buy the world’s goods.
Osborne’s second ambitious theme was that the Conservatives “are the only true party of labour.” An audacious land grab, but the rate of job creation gives it substance. It is unfair, as successive reports from the Office for National Statistics show, to dismiss these new jobs as all low paid or self-employed.
But it is not just job creation that he seeks. The aim, he says, is to “give Britain a pay rise… that it deserves.” He is right in his diagnosis of a persistent problem: the failure of productivity and therefore wages to rise, while the welfare system is not always directed at those who most need it and does not always encourage work. He wants, by cutting business taxes, to encourage businesses to put up wages. It remains to be seen, though, whether they will pay any attention to his moral lecture that they should do so. His prescription, unless it provokes an unusually fast change in behaviour from employers as well as workers, could hurt a lot of the less well off very hard.
Osborne showed in his first term far more agility and sensitivity than his rhetoric implied. He was the Austerity Chancellor in words, but not in actions. The election victory showed that 11.3m people supported or at least tolerated that plan. But given how much he softened the first term plan, it’s hard to know now whether to expect the same again—or whether he will indeed carry out the scale of cuts he describes. And on his ambitions of succeeding Cameron, he has delivered a sophisticated and ambitious speech about helping Britain change, beginning with the most concrete steps. The question is whether his image as the Austerity Chancellor—and the reality of the cuts he proposes in achieving that change—obstruct that vision of the future.