Revealed: Osborne’s next Budget

by Jonathan Todd

Of course, we strain every Labour sinew to have the next Budget delivered by Ed Balls. Even if the worst happens and the next government is Conservative led, it may be that George Osborne finds himself serving away from the Treasury.

But Osborne’s 2010 “emergency” Budget framed this parliament. Amid a leadership election, Labour struggled to respond. He’ll spy a way to repeat this trick. On different terms, however.

The 2010 vintage made spending this parliament’s key axis. Labour had spent too much. Osborne would curb it. You can’t trust Labour on spending but you can trust Osborne.

This spending card showed its age in 2014’s Autumn Statement. Again playing it big, Osborne crash landed in the 1930s. He predictably backed out of this rickets afflicted cul-de-sac in the Budget. Neither the Autumn Statement’s spending profile for the next parliament nor that which followed his Budget readjustment are truly credible.

It’s a charade engineered to push Labour into positions that allow him to bemoan Labour’s supposedly reckless profligacy. If Osborne does deliver another Budget, he would be expected to reveal the brutal details that he has lead us to expect.

Will he close the police? Or the army? Or is local government an outdated sticking plaster?

Much as Labour sees Osborne as an ideologue – and he probably does have somewhat more deeply held convictions than David Cameron, a particularly light wearer of his beliefs – he is sensible enough to know that the cuts that he has set himself up for in unprotected departments risk policy chaos and political ruin. To the extent that he has ever had a Long Term Economic Plan (LTEP), it has only existed as rhetoric of spending responsibility. The policy substance has regularly shifted, not least away from the 1930s between the Autumn Statement and the Budget.

Osborne has little policy fidelity but much attachment to rhetorical consistency. The key significance of his next Budget wouldn’t be a change of policy. It would be its rhetorical shift.

Tax, rather than spending, would be the axis upon which this change will turn. Three elements to this suggest themselves:

First, might full fiscal devolution for Scotland be the big, open and comprehensive offer that would motivate the SNP to prop up a Conservative government?

As a healthy Conservative majority is a distant dream, Osborne’s preference will be rolling on the governing partnership with the Liberal Democrats, which may be possible. But it may not, creating a Conservative incentive to make the SNP an offer too good to turn down, which Labour has sensibly demurred from making. While the devil would be in the detail, full fiscal devolution would likely be a disaster for the Scottish people. This is not a problem for Osborne or the SNP. It keeps him in government and them on the road to full independence.

Second, a new suite of sector specific business tax incentives. Osborne lacks fiscal room for new subsidies. It’s debateable how much is left in the locker marked deregulation but in any case, it lacks the simple, sexy charms of tax reductions. Labour has Ella’s Kitchen, Osborne would hope to diligently fire tax arrows to have as much of the rest of the business community as possible firmly on his side.

Third, and most dramatically, “an incentive formula based on the real level of income inequality (i.e. after adjusting for the cost of living) between the regions so that weaker regions would have lower taxes on both personal and corporate incomes”. This comes from a new book by Douglas McWilliams, until recently executive chairman of an economic consultancy and informal Osborne adviser. While McWilliams has recently endured allegations of assaulting a prostitute, it is striking that the other, less controversial recommendation that his book makes for regional rebalancing has already been acted upon by Osborne.

McWilliams’ tax proposal would, he argues, “turn the economically weaker parts of the UK into tax havens. It is pretty obvious that this is likely to help rebalance the UK economy – indeed it could do so remarkably quickly”. Of course, if Scotland has full fiscal devolution, it would be up to Edinburgh whether they too go in this direction.

In any case, it would discombobulate Labour as his 2010 “emergency” Budget did. If Labour didn’t endorse his plan, he’d insist that Labour can’t be trusted on tax. He’d seek to make this the key political dividing line, as oppose to spending plans that he never seriously intended to implement and which he’d quietly downplay. Unless and until his tax changes deliver the economic renaissance that McWilliams anticipates, generating tax revenues to close the fiscal deficit.

Such a Conservative inspired uptick in the fortunes of the north and the Midlands may be the precondition of improved performance by the party in these regions. This might sound ambitious but Osborne has never lacked that, which Labour might reflect upon if we remain in opposition beyond 7 May.

Senior Labour figures may focus on a potential leadership election if the party continues in opposition. But in this circumstance, we should not take our eye off Osborne’s ball – as we fatefully did in the summer of 2010.

Jonathan Todd is Deputy Editor of Labour Uncut

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One Response to “Revealed: Osborne’s next Budget”

  1. Ex labour says:

    Good grief yet more mouth frothing stuff from Johnny boy.

    Yet more ifs, buts, maybe’s and idle speculation written as fact.

    If my aunte Fanny had a knob, she’d be my uncle Fred. Thats as worthy speculation as this blog piece.

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