For Osborne's policy to have succeeded would have required abnormally good luckby Robert Skidelsky / July 17, 2017 / Leave a comment
Published in August 2017 issue of Prospect Magazine
Subjects can dominate the agenda one day, and then drop from view. Something of the kind has been happening to austerity. Two years ago nothing seemed so important to George Osborne as eliminating the budget deficit. In 2015, fresh from masterminding the Conservatives’ unexpected win, Osborne pledged himself to achieving a surplus by 2019-20 and announced further cuts of £12bn in welfare. Austerity, having been relaxed before the election, had returned with a flourish. Not only did the Chancellor claim that his austerity policies had produced economic recovery, but committed himself to an annually balanced budget for all time. No more nasty borrowing.
By 2015, the economy had started to grow with vigour: at 2.8 per cent in 2014 and then 2.2 per cent in 2015. The Office for Budget Responsibility forecast growth of 2.4-2.5 per cent in each of the next three years. It assumed that the British people would sensibly vote to remain in the European Union. On the basis of such prospects, there seemed little obstacle to the promised surplus—or the elevation of a successful chancellor to the premiership.
Then came the Brexit vote. Forecasts were revised drastically downwards, and Osborne was translated not to No 10 but first to lucrative jobs and lectures, and then the Evening Standard. The mood music abruptly changed. Theresa May reinstated “One Nation” Conservatism; her chancellor, Philip Hammond, abandoned Osborne’s targets. Yes, the deficit was on a “downward path,” but no one could say when it would be gone.
Still, there was no doubt in the mind of May that the voters would give her a thumping majority. But with Labour’s disturbing recovery and consequent hung parliament, growth numbers were revised down again. In the Queen’s Speech, the minority Tory government finally put “strengthening the economy” ahead of the commitment to “improve the public finances.” Not long ago, the whole Cabinet—Lib Dem and Tory—buckled under the weight of the deficit fixation. No longer. Today the Health Secretary is petitioning for an NHS bailout, while the Education Secretary argues that cuts to the schools budget are no way to prepare for a prosperous future. Damian Green, the deputy prime minister in all but name, has pushed student debt up the agenda, and even the Foreign Secretary has suggested that the country can afford to do without a rigid cap on public sector pay.