Analysis: Osborne begins the long defence
We’d better get used to the arguments used in George Osborne’s first truly defensive speech as chancellor, for they will be repeated many times in the months to come.
We knew the chancellor was nervy about the coalition’s close association with spending cuts – and the misery they will bring. This was his chance to accentuate the positives of austerity.
But it is very difficult to be defensive and visionary at the same time. Politicians tend to revert to using nautical analogies when they are concentrating on the former. Osborne gave the game away when he began talking about the need to “stick to the course” and “hold firm”. Only by doing so would it be possible to “navigate our way through to calmer waters”. Acting otherwise, he warned, was “the surest way to disaster”. Rolling back on the cuts already embarked upon would “wreck the British economy” – presumably on the jagged rocks of short-term public popularity.
The chancellor was not shy about revealing the topography of the perilous shore under his lee. He mentioned “persistent” inflation, the ongoing limited availability of credit to small businesses and poor performances from the Japanese and American economies.
What he did not mention was that the Bank of England’s most recent inflation report had reduced its growth predictions for 2011 down from roughly 3.4% to around 2.5% – a sudden and drastic reduction blamed solely on the emergency Budget and its VAT hike. Questions are being asked about whether the government really had to act as drastically as it is now doing. The comprehensive spending review plans to cut the size of the state by £111 billion in the next five years. Is it really worth it? Is it, as shadow chancellor Alistair Darling put it today, a “huge gamble with the recovery”?
Osborne, having positioned himself with his back firmly against the wall, responded with the bare bones of the arguments we can expect again and again. This is based in downplaying the misery of the present and looking to longer-term benefits. The Conservatives’ approach is to hope the interests of ordinary people will be safeguarded by a more general prosperity; nothing much has changed there. It is an approach focused on the markets rather than the voters.
When pressed in the question and answer session which followed his speech, the chancellor returned to the markets. “It is cheaper to borrow money today than it was when the government was elected,” he said. That “huge stimulating effect” was contrasted with the nightmare scenario in which Osborne reverses his plans on October 20th. “There would be a really serious loss of confidence, I suspect, within the British economy.”
The coalition faces an uphill battle persuading voters that its approach to spending cuts is truly progressive. The entire left-wing of British politics is mobilising for a tremendous fight against precisely this point. During the debates on the emergency Budget Osborne and co argued the tax package was more or less ‘progressive’ – that is, helping the poor rather than the rich. Vince Cable was reduced to citing an Institute of Fiscal Studies report claiming it was “slightly progressive”.
Now the chancellor has moved on, confronting the enormous departmental budget cuts which could reach an average of 33%, he has retreated to a more general defence. “Fiscal responsibility is both fair and progressive,” Osborne argued. “Governments that lose control of their public finances are the most unfair and progressive.”
This will be enough to win over the well-dressed audience of City workers whose decisions on the trading floor are vital to Britain’s economic future. But it will not go far enough to win over ordinary people facing sweeping reductions in their benefits and public services. They’re the ones who really need persuading. For now, Osborne seems content preaching to the converted.