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Posts Tagged ‘George Osborne’

Budget 2014 preview: Labour must change the language it uses to talk about business and economics

19/03/2014, 07:00:50 AM

by Rob Marchant

Today Britain’s political focus turns, as it always does sooner or later, to the economy. It is the last Budget which will come in time to make much of a difference for the election, an election for which all parties now start to gradually gather together their support from various quarters and interest groups.

Osborne will set out his pre-election stall and Miliband will respond. We have yet to see just how he will respond, but it seems pretty likely that it will be along the lines of his op-ed in yesterday’s Guardian.

Reading it, thankfully, Miliband seems to have learned his lesson from the awful “predators and producers” speech of the party’s 2012 conference and is now more careful with his wording. But if you want to really understand what a politician is thinking on a particular subject, you should look to their advisers on that subject; those who may unguardedly say what their bosses cannot. More of that later.

Now, one notable absence – or, more unkindly, gaping hole – in the 2010 election campaign was any noticeable support from the business community. A stony silence replaced the modest set of endorsers for the party’s business policies who had previously spoken in support of the party. And that was in the days of Prime Minister Brown, whose administration certainly had a more business-friendly character than the party’s current leadership.

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Miliband’s reckoning must also reassure

20/01/2014, 02:24:17 PM

by Jonathan Todd

“The next election”, according to an answer that Ed Miliband gave on Friday, “will be a choice between a big reckoning and steady as she goes.” There wasn’t much that Mliband understated in setting out how Britain would change with him in charge. But this was one thing. There is no steady as she goes option.

George Osborne can only make his sums add up with a much reduced role for government outside of ringfenced areas and/or further cuts for the disabled, children and the working poor. That’s not so much steady as she goes as once more into the breach, as the ship heads towards the rapids. Osborne gave the impression in 2011 that the electorate had sacrificed all that he’d ask of them. Now he asks them to keep sacrificing till 2018/19.

His ‘baseline theory’ of politics encourages this strategy. This forces Labour to choose: Match my baseline and all the tough choices that entails or don’t and accept that the full force of HM Treasury will be thrown at undermining Labour’s credibility.

Miliband’s speech was his response to Osborne’s gaunlet. Which he picked up, tossed aside and dismissed as redundant. Deficit reduction alone can’t fix our economy, he told us. Nor alone can it make hard work pay or be a vision for the country, he continued.

Osborne tried to force Miliband to talk about the size of government but he insisted on telling business what to do. His refusal to play Osborne’s game may have had something of Jarvis Cocker’s snapping of a pencil about it (See two minutes in to this). There is, however, nothing scrawny about Miliband’s attitude to business. He is as muscular in articulating what he will require of them as Osborne is unrelenting in shrinking the state. It’s not a nudge – once a buzzword in David Cameron’s circle – that Miliband wants to give business but an unavoidable prod.

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Osborne’s tank tries to churn up Ed’s lawn

17/01/2014, 08:24:49 AM

by Kevin Meagher

He would bristle at the comparison, but George Osborne’s raid on Labour’s turf – promising to support an above inflation rise in the minimum wage – is straight out of the Gordon Brown book of political tradecraft.

The two most political bean-counters British politics has ever produced are both fans of ‘weaponising’ policy to suit their ends; laying clever traps for their enemies to fall into and using the Treasury’s tanks to churn up the opposition’s lawn.

“I want to make sure we are all in it together” said Osborne yesterday, to a chorus of generally disbelieving gasps. The minimum wage should increase “because the British economy can now afford that.”

The Tories used to be “on the wrong side of the argument” about the merits of the minimum wage, but that was all a misunderstanding. Now it’s a shiny, happy, modern party “in touch with the country,” he added.

ITV’s Chris Ship said the Lib Dems were “spitting tacks” as Osborne had veered over the coalition’s central reservation, cutting them out of the equation on a major good news story.

“He’s effectively endorsing the advice I gave to the Low Pay Commission” said Vince Cable on Newsnight last night, trying to sound nonchalant at the very effrontery of it all. Labour people too were miffed at Osborne’s naked opportunism. How dare a Tory Chancellor say anything positive about the minimum wage!

In a funny sort of way, Ed Miliband should take all this as a compliment. Imitation is the sincerest form of flattery. That Osborne felt compelled to try and spike today’s big speech on the economy and banking reform shows the Tories are irked about headlines proclaiming “I can save the middle class”.

So in the best traditions of “you send one of my guys to the hospital, I’ll send one of yours to the morgue” Osborne’s instinct is to wield his home-made shiv. It’s not pretty, but it is effective.

Gordon would approve.

Kevin Meagher is associate editor of Labour Uncut

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Osborne’s made his move. Now it’s Labour’s turn

14/01/2014, 09:37:04 AM

by Jonathan Todd

We are a nation seeking to rebuild from the economic calamity of the past half decade. You might think this task merits a chancellor focused upon it. But George Osborne doesn’t look to Keynes, Friedman or other economists. He prefers his own ‘baseline theory’ of politics.

As we grasp for an economic rubber ring, we’re thrown the thin gruel of his politics. To the extent that his actions are informed by any economic strategy, it envisages a state so shrunken as to be beyond the ken of post 1945 Britain. Yet his political logic is robust enough that this troubling scenario may come to pass after May 2015.

Osborne’s theory is informed by an impeccable reading of recent general elections. It holds that oppositions never form governments unless they match the fiscal plan of incumbents. Governing parties hold the privilege of being able to set the fiscal baseline. Any departures from this baseline by oppositions will be subject to intense scrutiny. In 1992, this resulted in the Labour opposition seeming to threaten a ‘tax bombshell’, while in 2001 and 2005, it resulted in the Conservatives appearing a menace to public services.

Over the next 18 months or so, the TUC’s Duncan Weldon suspects, the implausibility of Osborne’s baseline will stretch this theory – perhaps to destruction. In this baseline, £25bn of additional spending cuts – much of them from the welfare budget – come after the next election. But, as Weldon notes, the necessity of running a surplus by 2018/19, which motivates these cuts, is not set in stone. It is a political choice. The UK will only come apart if Scotland votes for it, not if a surplus isn’t run by 2018/19.

In fact, there appears more likelihood of grim things happening if Osborne’s baseline is kept to than if it isn’t. It’s delivery – assuming no further tax rises, protection for pensioner benefits and continued ringfences for the NHS, schools and DfID – requires a much reduced role for government outside of ringfenced areas and/or further cuts for the disabled, children and the working poor.

This delivery isn’t impossible but it is likely to be brutal. Perhaps so much so as to effectively be impossible. The social strain and political pain might just be too much. Maybe Osborne knows this and has no genuine intention of seeing this through in the event of being in office after May 2015. But, in indicating that he will, he’s presented Labour with a set of unattractive options.

One such option is for Labour to accept Osborne’s baseline. In its toughest form, this would mean not only accepting £25bn of extra cuts but accepting that half of them will come from welfare payments to working age adults. This would put Labour in a position that Nick Clegg has already castigated as unfair.

It seems unlikely, therefore, that this will come to be Labour’s position. Instead, Labour might match the Liberal Democrat position: acceptance of the £25bn but rejection of the depth of cuts to working age welfare. This rejection, however, only deepens questions as to how the £25bn will be made up.

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Autumn Statement review: It’s Reagan ’84 vs Reagan ’80

06/12/2013, 12:05:49 PM

by Jonathan Todd

Barack Obama’s second term was meant to pivot. From the Middle East which has sapped American military resources and moral authority, to the Pacific, the new crucible of economic and political power. Then the Arab Spring was followed by the disintegration of Syria, the reassertion of Egyptian military rule and such intense strife that the US could not pivot from the Middle East. Even as the rivalry between China and Japan gets hotter.

Barack Obama couldn’t pivot but George Osborne wants to. From pessimism to optimism. From recession to renewal. From the micro to the macro. There are a series of pivots that the Autumn Statement attempts, which are a claim for the most prized piece of political real estate that no one in this parliament has been able to make their own: the future.

88% of Chinese have an optimistic economic outlook, according to Pew. In contrast, only 15% of Britons do. This doesn’t tell of the innate sunny outlook of the Chinese and the persistent gloominess of the British. It tells us that people can see what is in front of their eyes.

The dizzying skyscrapers and rapid economic change convince the Chinese that the future is theirs. The British fear that our best days are behind us. That our children will not enjoy the opportunities that we’ve had. That the country that gave the world the industrial revolution can no longer earn its crust in the era of the digital revolution.

In advance of the Autumn Statement, David Cameron led a trade delegation to China. The Statement revealed improving growth and public finances figures. It remains to be seen whether these figures and initiatives like this delegation come to convince us to believe in the future.

Labour’s successful campaigning on the cost of living militates against this. Last month, a Populus survey found that 38 per cent of voters agree that there is a national economic recovery under way but that only 11 per cent feel part of it, as Matthew D’Ancona has noted. We increasing see a recovery, which the Statement re-stressed to us, but it seems a recovery for the few, not the many, which Labour’s cost of living campaign wants us to think.

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The questions facing George Osborne in the Autumn statement

02/12/2013, 07:00:20 AM

by Jonathan Todd

We all live in a George Osborne submarine. Or so he wishes. Doing his work beneath the surface, emerging periodically to bestride events, such as this week’s distinctly wintry Autumn statement.

Osborne saw Gordon Brown use these set piece occasions to determine the terms of political trade. He’s equally keen to exploit his bully pulpit. He faces, though, a number of challenges to doing so:

1.) Has the relationship between economic and Tory recovery broken?

The Autumn Statement is wintry in the sense that it’s being delivered in December. The economy, however, is more mid-March. The darkest days feel behind us and something better nearly upon us.

Given this, Benedict Brogan asked a pertinent question recently: Why are the Tories not doing better in the polls?

The Todd thesis – as Lewis Baston called it – appeared to break down as soon as it was expounded. This thesis was based on a regression analysis of economic sentiment and Labour’s lead over the Tories. It was expounded at the end of October and held that for every 1% increase in the proportion of the electorate reporting the economy as doing well, the Tories would close on Labour by 0.6%. Since then, there has been a 3% increase in the proportion of the electorate reporting the economy as doing well. But, while there is some fluctuation, Labour’s lead has held firm enough to prompt Brogan’s question.

It may be that the Todd thesis will reassert itself over a longer time horizon. If economic sentiment keeps improving, growth in Tory support will eventually catch up. Less positively for Osborne, it may be that the Todd thesis has collapsed because something has happened to disrupt the causality between improving economic sentiment and growing Tory support.

Ed Miliband’s focus on the cost of living may mean that even though people increasingly feel the economy is doing well, they don’t believe this improvement will benefit them, so it doesn’t translate into Tory support. Alternatively, the better people feel about the economy, the less Labour’s reputation for profligacy may trouble them. In better times, Labour becomes a risk worth taking.

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There is a simple Tory response on energy prices and Labour needs to beware

30/09/2013, 09:42:23 AM

by Jonathan Todd

Ed Miliband provided answers to some questions posed by Uncut in the book we launched at Labour conference. Less so, others.

We asked where the money will come from. He committed to 200,000 extra homes a year without – unlike David Talbot’s chapter in our book – making clear from where the extra public resources needed to deliver this will come.

Miliband did tell us where the money for his promised energy price freeze will come from, the companies themselves. It is an imponderable whether this will result in reduced profits for them or diminishment in the green investment that Miliband treasures.

It is clear, however, that without the costs of this investment, there would be greater scope for lower household bills. Whether this investment will sufficiently dampen the impacts of climate change to justify its hefty cost is another imponderable.

The incoming prime minister of Australia is among those who doubt it. The prime minister of this country will have noted this and knows that reducing the green push will increase the scope to minimise household bills before May 2015. If Cameron were to take this option, the energy firms will align with Cameron, as both leaders would be telling them to reduce prices but only one would be enabling them to reduce costs – assuming Miliband remains faithfully green.

The public may see their bills fall before 2015 – a record of delivery for Cameron, potentially to sit alongside a steadily improving economy. Rather than return him to office, the public would be asked to vote for a freeze in energy prices by a Labour party likely to be enamoured by the green lobby but less so by business, at least big business.

Miliband needs to get on the front foot about the assistance he has offered to small businesses, while considering exactly how wedded he is to imposing green costs on energy firms. Unless these small businesses become Labour advocates, the party risks being painted as anti-business. Without some flexibility on green costs, Miliband may risk Cameron achieving more on lower energy prices before he is even in a position to implement his freeze.

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For hard working people? Come off it Cameron. Here’s the “Top 40” of Tory failures

29/09/2013, 08:00:31 AM

Last year, I wrote a blog for Labour Uncut about Cameron’s top 30 “real achievements”. But things have got so bad in the last year alone that this year’s round up is now a full “Top 40”. As the Tories meet this week for their annual conference in Manchester, here’s my latest assessment on what Cameron’s Government has really achieved since 2010:

On the cost of living:

1. Prices have risen faster than wages in 38 out of 39 months while David Cameron has been Prime Minister.

2. Wages are down by almost £1,500 a year on average since the General Election.

3. While ordinary people are seeing their living standards squeezed, David Cameron has cut income tax for people earning over £150,000. And in April this year, bankers’ bonuses soared by 82 per cent as the wealthiest took advantage of the 50p tax cut.

4. Average energy bills have risen by £300 since David Cameron became Prime Minister whilst Britain’s big six energy companies have enjoyed a £3.3 billion windfall in profits since 2010.

5. David Cameron has broken his promise to force energy companies to put all consumers on the cheapest tariff.

On growth:

6. This is the slowest recovery for 100 years. Since autumn 2010, our economy has grown by just 1.7 per cent compared to the 6.9 per cent expected at the time.

7. The UK is currently 3.3 per cent below its pre-crisis peak, while the USA is 4.6 per cent above its pre-crisis peak.

On the deficit:

8. David Cameron and George Osborne are now set to borrow £245 billion more than they planned in 2010 and the independent Office for Budget Responsibility has said that deficit reduction has “stalled”.

On jobs:

9. Almost a million young people are unemployed.

10. The number of 16-18 year olds starting apprenticeships is down by 12 per cent in the last year. Overall, nearly 200,000 16-18 year olds are not in work, education or training, a rise since 2010.

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What is the point of today’s Labour party?

21/08/2013, 10:01:17 AM

by Dan McCurry

Way back in 1992, at the TUC conference, John Prescott stunned the socialist movement, by making a forceful speech in favour of John Smith’s proposed trade union reform. He attacked the unions for even questioning the motives of the Labour leader. He shamed them into submission. He showed that his loyalty is to the party over the unions and as a result, was rewarded with the deputy leadership when Tony Blair later rose to power.

He is the closest thing there is to Labour party royalty, and he just accused the party leader of being ineffective. This is not unreasonable. Everywhere I look I see the government’s economic policy being attacked. The Economist magazine calls the right to buy policy “A daft new government-subsidy scheme”, but what did we hear from Labour? Nothing. Not a dickie bird.

Look at the way the non-aligned commentators judge Osborne’s policy. Here’s Frances Coppola, an economics blogger, and academic of the Cass business school,

As my regular readers know, I am determinedly politically non-aligned, so what I am going to say now will probably shock a lot of people. Osborne’s behaviour both angers and frightens me. He is playing brinkmanship with the UK economy to achieve political ends. Nothing he does makes much sense from an economic point of view – which is why the flagship Help to Buy scheme has been universally panned, even by his own department and by people from his own party. But if you view his actions as entirely determined by his desire to secure a Conservative victory in 2015, it all makes perfect sense. He is dangerous.

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Labour must expose the Tory wealth trap

14/08/2013, 11:05:13 AM

by Dan McCurry

The Tory wealth trap is making the rich richer, while the rest of the population either stands still or gets poorer. There is no trickle down effect caused by the squeezing the real economy with ill-timed austerity, while flooding the financial markets with cheap money, QE. All this achieves is to boost asset wealth while eroding wages, through pay freezes and inflation.

This wealth trap is caused by the desire of the Tories is to preserve their own wealth, but is exacerbated by the failure of George Osborne’s original economic policy, of expansionary austerity, whereby companies would be inspired by the cuts to invest. When that didn’t happen and the economy froze for three long years, he resorted to creating a debt bubble through subsidised mortgages.

The Tory policies are about to get worse. The current mortgage subsidy is £3.5bn. But this was only to buy new builds, which is excusable if it helps create shovel-ready jobs. However, the £3.5bn is about to be expanded to £12bn for all mortgages, just for the year running up to the general election. There couldn’t be a more blatant bribe than pumping up house prices in the run up to an election, without a care for the damage this will do to the economy in the medium and long run.

The most cynical aspect is that the pumping up of debt is all done “off-balance sheet”. George Osborne used to accuse Labour of not regulating the banks, who did off-balance sheet accounting, so who is regulating George Osborne, when he does exactly the same as a cover for his failed policies? The total amount of mortgage guarantees should be added to deficit, not recorded off-balance sheet, as this is the amount we are liable to if they go wrong.

It has always been Labour’s policy to invest in the real economy, the place where people have jobs and businesses. The original QE program was limited to creating liquidity in finance, oiling the wheels following the banking crisis. The Tories have transformed it into a massive hand out for the rich, at the expense of the rest of the economy.

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