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Posts Tagged ‘George Osborne’

Osborne chooses Tory politics over one nation economics

21/03/2013, 11:42:11 AM

by Jonathan Todd

Daniel Finkelstein is a leading commentator and one of David Cameron’s most articulate defenders. No other columnist has the economic gravitas of Martin Wolf. Pieces from Finkelstein and Wolf in the week before the Budget exposed the tensions at the heart of the government’s economic and political strategies.

Finkelstein argued that the Conservatives have three assets: David Cameron; a Labour Party that “has pitched itself too far to the left”; and “the large constituency of voters who … don’t want to borrow more”.

On the same day Martin Wolf demolished David Cameron’s “there is no alternative” speech.

“What truly is incredible is that Mr Cameron cannot understand that, if an entity that spends close to half of gross domestic product retrenches as the private sector is also retrenching, the decline in overall output may be so large that its finances end up worse than when it started.”

What Wolf considers economically indefensible – not taking advantage of rock bottom interest rates to borrow more to stimulate recovery – is what Finkelstein considers to be a political strength. Those who join Wolf in advocating stimulus include: Labour, TUC, CBI, BCC, Vince Cable, IMF, NIESR, Bloomberg, The Economist, and Oxford Economics.

Equally, the political rationale that Finkelstein appeals to is not groundless. That 10 per cent more voters blame the last Labour government for the cuts than the current government speaks to the reputation for dangerous profligacy that continues to attach to Ed Miliband’s party (YouGov, 17/18 Feb). These voters believe that the Conservatives are doing the tough but necessary, while Labour offers only a risk, not a sound alternative.

This popular view, which sustains Finkelstein’s political logic, is, however, challenged by a growing economic consensus in favour of an approach quite different from that offered by Osborne.

He talks of supply-side reform when it is an absence of demand that holds the UK back. He claims fiscal responsibility when the stuff of genuine fiscal responsibility would involve recovering this demand. He pins his hopes on active monetary policy – near zero interest rates and QE – when the experience of recent years provides amble justification for Keynes’ view that loose monetary policy amounts to pushing on a piece of string in a depressed economy.

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Labour must not be smug about bad economic news

07/03/2013, 07:00:54 AM

by Peter Watt

This time in two weeks we will all be chewing over the chancellor’s budget. If the mood music is to be believed then we will not be reviewing a dramatic budget replete with economic flourish. Rather it will basically be a restatement of the deficit reduction plan outlined in the coalition agreement.

There will in all likelihood be the addition of a few targeted tax breaks, some nod to infrastructure spending and some extension of the state backed business bank. But basically no real change in approach. However Osborne is no fool, so we can safely say that he will have something up his sleeve that will be the measure that he hopes will define his budget.

Presumably he and his team will do a better job of politically sense checking his budget this year than last! Team Osborne is under pressure from their own side as MPs can see the possibility of winning the next election slowly becoming less likely.

But Labour will also be under pressure. Whilst Labour’s economic numbers are improving they are still blamed by much of the electorate for causing the economic woes facing Osborne and the country. And that is why the tone of their response will really matter.

Generally speaking, if you are held responsible for causing a problem it is not a good idea to appear really pleased that someone who is trying to sort out your mess is struggling! It certainly won’t convince anyone that you didn’t actually cause the problem in the first place. It is unlikely to make you look clever; in fact it will probably simply reinforce the idea that the whole thing was your fault anyway, and that you had failed to learn the lessons and were in fact in denial.

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The public’s fear of the future will frame George Osborne’s budget

04/03/2013, 04:10:05 PM

by Jonathan Todd

It is not only Charlie Brooker who thinks the future is broken. Businesses and households do too. This is why businesses are sitting on billions of pounds. They don’t think there is a future worth investing in. This is massively economically significant, but perhaps more politically significant is the resignation of the public to their grim economic fate.

Some of the public are drowning, few are waving, and most are shrugging their shoulders. George Osborne’s biographer, Janan Ganesh, recently noted in the Financial Times: “The regular focus groups that are conducted by Downing Street paint a picture of an electorate that is bleak about the economy, yes, but so bleak that they don’t believe things would much improve under an alternative policy.”

Those that aren’t drowning, waving or shrugging their shoulders, are getting angry, which increasingly means voting for UKIP. Not as a principled stand against the EU but, as Michael Ashcroft’s polling attests, an anguished cry against the established parties. UKIP recoils, as Matthew d’Ancona accurately puts it, not from Europe specifically but from change generally.

UKIP is an emotional spasm against the political class and the inadequate modernity that they represent, as well as an insatiable longing for an unrecoverable past. While a growing minority of the electorate fall for this spasm, most are bleakly indifferent.

Allister Heath on the right would sacrifice short-term deficit reduction for a dramatic cut in corporation tax and Will Straw on the left for increased public investment. There is, though, scant evidence that the public believe that the methods of either the left or the right will make much difference. And the public might have a point.

Given the piles of cash on which businesses currently sit, Heath’s policy may only deepen these piles. Straw is right to see the cuts to public investment as the most economically damaging of those inflicted by Osborne but only rapidly “shovel-ready” projects are likely to make a difference to GDP in the near-term.

While both left and right urge upon Osborne a focus on recovering growth, not short-term deficit reduction, there are reasons to be sceptical about the capacity of the policies of the left and right to secure their shared objective. And sceptical is certainly what the public feel about the ability of politicians to improve things.

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Labour must be careful: Osborne wasn’t downgraded for cutting, but cutting the wrong way

25/02/2013, 07:00:53 AM

by Jonathan Todd

John Moody first offered credit rating services in the US in 1909. By this time, Dutch investors had been buying bonds for three centuries, English investors for two, and American investors for one century. Investors have, therefore, prospered for long periods without credit rating agencies.

Many would argue that they could again. The agencies did not facilitate wise investment by giving triple A ratings to the collateralized debt obligations (CDOs) that were at the heart of the financial crisis. CDOs are, however, complex financial instruments. While the ratings were misplaced, it is understandable that financiers would place value on independent assessment of credit worthiness in the face of such complexity.

The UK is less complicated. We are, obviously, struggling. National wealth has not increased since George Osborne became Chancellor. But national debt has increased by over 30 per cent, taking it over one trillion pounds for the first time in history.

Osborne likes household analogies. His UK is a household with no more wealth than it had almost three years ago and little likelihood that this wealth will significantly increase in the near term. But ballooning credit card debts. This is the kind of household that finds it very difficult to get a mortgage in Osborne’s Britain.

Osborne has not practised the “arithmetic” that Bill Clinton beautifully described and praised in his speech to the Democratic National Convention last year. And we hardly need credit rating agencies to tell us this. Those trading in UK debt certainly don’t. This is why – like France and the US before us – a downgrade may have little impact upon the cost of UK debt. The factors that have led to the downgrade have already been factored into the price.

While the downgrade told us what we already knew, Osborne might privately lament: “The agencies told me to cut or be downgraded, so I cut. Then we didn’t grow and they downgraded me, anyway.” Not only are agencies discredited after their poor assessments of instruments like CDOs, they also urged cuts upon Osborne and welcomed his willingness to go further and faster than Alistair Darling had proposed. Osborne may be frustrated for being punished for following this path.

Up to a point, Chancellor, more balanced counsel would insist. What matters is not only that cuts are made but what is cut. The composition of public spending matters, as well as its level. Net public investment for 2015-16 was cut to just 1.1 per cent of GDP from 3.5 per cent in 2009-10 in Osborne’s 2010 budget.

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We are witnessing the march of the zombie jobs

04/02/2013, 03:11:56 PM

by Dan McCurry

We now have an explanation for why unemployment hasn’t soared in the worst recession since the first World War.

It seems that the banks are keeping failing companies afloat rather than calling in their loans, for fear of damaging their capital base and failing to comply with regulations. It is this priority of the regulators that has had the perverse effect of bunging up the unemployment market and creating a million zombie jobs.

Before you think this is a good thing, recognise that productivity is supposed to improve during a recession, instead it has slumped, causing long term damage. Meanwhile the unemployment has only been delayed. Sooner or later the banks will be forced to call in their loans. At that point, the zombie companies fold, and the workers become unemployed.

When I was working for a retail chain called Wilding Office Machines in the early ‘90s recession, the board decided to start, and then lose, a price war with Dixons. A man called Charles Wigador had built a fleet of salesmen selling mobile phones to businesses. Phones were changing from being bricks to pocket sized devices that consumers could buy, but there were no retail shops to supply them. When we were about to go bust Charles bought us out, all 120 shops, staff and head office, for a mere £100k.

For us, overnight the recession ended and we were on the cutting edge of a new business, and Britain was at the cutting edge of mobile phones. Within a couple of years, Charles sold out to a small company called Vodafone for £17 million.

If George Osborne was in charge at the time, Wildings would have been kept alive as a zombie company and Vodafone would not today exist as the largest phone company in the world. George Osborne promised the “march of the makers”, but the British economy today can best be described as the march of the zombies.

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Whip’s Notebook: The great boundary bust-up

01/02/2013, 09:00:25 AM

by Jon Ashworth

Tuesday was not a good day for the Tory whips.

There were early signs that not all was well on the Tory benches at Tuesday’s Treasury questions. In Westminster terms, the monthly joust between Ed Balls and George Osborne is usually box office and true to form the Labour benches were packed. Yet strangely the Tory benches were sparse and subdued.

A complete contrast with two and half years ago when adoring Tory MPs would try desperately hard to impress Osborne asking helpful questions here and guffawing at every “gag” there.

But now what a turnaround.

As each day goes by and we hear more grim news about an economy that continues to flat line while government borrowing and debt continues to increase, it seems Tory MPs are literally deserting their chancellor. Future leaders now talked of are Norman, Afyirie, Johnson and Gove, not Osborne anymore. No wonder his punch lines this week were greeted with tumbleweed on the Tory benches.

Perhaps Tory MPs were saving themselves for the debate later that afternoon on the boundaries and boy did they vent their spleen. Take Portsmouth Tory MP Penny Mordaunt accusing the Liberal Democrats of “spite, pettiness and self-interest”, while at the same time appearing oblivious to the fact that the pain she was experiencing from this Lib Dem “betrayal” was as a result of the gun she had taken and fired at her own foot as a Tory ringleader of the Lords rebellion last year.

Tory MP after Tory MP spluttered about the impertinence of an unelected chamber telling the Commons how it’s elected members’ constituency boundaries should be drawn. The self same Tory MPs who had defended and voted for an unelected House of Lords just months earlier.

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On welfare, Labour needs to be the party of work

07/01/2013, 07:59:11 AM

by Jonathan Todd

Labour debating the Conservatives on welfare is not a clash between two settled bodies of opinion. As public opinion evolves, so does internal debate within both parties. Casualties will come from “friendly fire” and the fog of war is thick.

There are those within Labour who think that George Osborne has snookered our party with the welfare uprating bill. In contrast, others think Osborne has overplayed his hand and we will be rewarded for principled opposition to the bill.

The latter are in sympathy with the rhetorical question of John Harris: If every Labour politician cannot oppose Osborne’s strivers and skivers plan in its toxic entirety, what exactly are they here for?

The former both dismiss this as naive and discount the capacity of the more nuanced opposition that Gavin Kelly has articulated and which Labour’s guarantee of a job for those out of work for 2 years is a variant of.

This guarantee seems a step away from the Harris position, which rejects absolutely the welfare uprating bill, and towards a position that argues the bill is unnecessary as there are better means of reforming our welfare system. Taking this step has the advantage of reducing the extent to which we seem to defend a discredited status quo. Equally, it will disappoint those attracted to a more visceral rebuttal of Osborne.

While there is diversity of opinion within Labour, it would be mistaken to think that the Conservatives are united. Indeed, they are at war, if a Peter Oborne piece from just before Christmas is to be believed. Soon after Christmas a cabinet minister was speaking in less than glowing terms about Iain Duncan-Smith’s universal credit. “The information technology for the new system is nowhere near ready. It’s a disaster waiting to happen.”

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Osborne lays the trap. Enter Labour, not walking but running

12/12/2012, 03:29:50 PM

by Rob Marchant

The weekend before last, I watched Chitty Chitty Bang Bang, the classic kids’ film of my own childhood, with my five year-old for the first time. When the famous “child catcher” scene came on, and the children were being tempted into the evil kiddy catcher’s van with sweets and lollipops, it ended with genuine, heartfelt cries of “no, noooooooo…!” as she vainly urged Jeremy and Jemima to see the danger. The bright colours and bunting suddenly fall from the van to reveal a cage, inside which the children are helplessly trapped (the point at which, as I remember, I was usually to be found hiding behind the sofa).

This last weekend, then, on seeing the media coverage of a mooted Miliband “war” on benefit cuts, the cage metaphor already seemed like déjà vu. And the Commons statement by Ed Balls, confirming that Labour will vote against the welfare bill, seemed to be accompanied by the clunk of a big door closing.

Labour does not, of course, really think that people should be allowed to “scrounge”, and there is a genuine, balanced debate to be had on how to prevent abuses and dependency while continuing to protect the vulnerable. But there is also a realpolitik argument of ensuring that your argument can be painted in primary colours. Shades of grey can and will be twisted.

The logic is not subtle. It is not about nuance. It is about how well our subtle argument will fare in the political joust against a brutal cudgel of one: that Labour is “on the side of the scroungers”. And the answer is not very well, if the relative success of the competing economic narratives – “too far, too fast” versus “Labour maxed out the credit card” – is anything to go by.

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George Osborne has learned his trade from Gordon Brown

10/12/2012, 09:07:19 AM

by David Talbot

“To bring all these decisions for many benefits over many years together,” Osborne told the House of Commons last Wednesday, “we will introduce into parliament primary legislation – the welfare uprating bill. I hope it commands support from both sides of the House of Commons”.

At that moment a thin smile seemed to escape the chancellor’s lips. Or if it didn’t, it should have done. For it represented the Damascene conversion of George Osborne to the scriptures of a once imperious Gordon Brown. And it was a moment of horribly low cunning that was eerily familiar for the Labour benches.

The announcement managed the near politically impossible. It will raise money, it will be popular and it will trap the opposition. It is vintage Gordon Brown, from the days when he was still known as the iron chancellor rather than the flailing prime minister of more recent memory. Yes, it’s easy to forget, but at one time, Brown was the political master of all he surveyed.

The guttural roar that greeted Osborne’s announcement from the Tory backbenches signified wholehearted approval of their chancellor’s ruse. Budgets are meant to be about economics. But for the two most political chancellors of the modern era, everything is politics. The statistics, forecasts, tax and public spending changes are immaterial for the political battleground with their hated opposition.

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In yesterday’s debate, George Osborne had a clear script, Ed Balls didn’t

06/12/2012, 10:00:08 AM

by Jonathan Todd

“It was just like a budget”. This was the immediate reaction of the ever perceptive Nigel Lawson when the Daily Politics sought it soon after the Autumn statement. Ming Campbell – the only other participant on a very balanced panel – concurred. That said; they had a point. Not only was the stagecraft familiar. The content was too.

The Conservatives have a script, you see. China is rising but the skivers aren’t, so further welfare reform is needed to prevent China eating all our dinners. The global race will be won by strivers, not drunken layabouts. And reform of our schools will create a nation of strivers. That’s if Johnny Foreigner and his euro don’t do what the last government and our “mess” could not quite do and do for us good and proper.

This script has been obvious since Conservative party conference. It has, in its own parlance, stayed the course. It is no surprise, therefore, that it was served up again yesterday. That’s the thing with political scripts. Politicians disembark on one that feels right, feelings which polling confirms. Then they keep saying it and saying it and saying it some more. Finally, maybe, it hits home with the electorate. By which time, certainly, they have bored themselves and the lobby into a stupor.

It was never really in doubt, consequently, what Osborne’s key messages would be. Any sentient political observer should have long known. We know its villains: the last government and the bed we made; welfare recipients and the beds that they lie in; the rest of Europe and their siesta.

But Osborne’s heroes shun and abhor all such lazy, flabby, debt-sodden indulgence. It is the strivers that have doubled exports to major emerging economies since 2009 and created over a million jobs in the private sector since he became chancellor.

Politics is the ceaseless clash of narratives: many half-baked, most never reaching a real terminus but the endless grafting of perceptions unto realities. So, what story did Ed Balls tell in rebutting this tale of striving heroes and shirking villains?

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