6 Jan 2014

George Osborne speech: complacency, traps and bombshells

George Osborne said he wanted to warn about “a dangerous new complacency” that he’d sensed on the economy. Privately, he and others at the top of the Tory party think they may have contributed to this.

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When the chancellor himself talked last September of the economy “turning a corner” the “turning point” became the story rather than the caveats that surrounded it.

When Ed Miliband flashed an energy bill offer in front of the voters at his party conference later that month, George Osborne and others around him insisted they wouldn’t play on Labour’s pitch and muddle their own message by making similar retail offers to voters. But No 10 felt it couldn’t risk looking out of touch with voters’ cost of living concerns and rushed out a series of announcements intended to show they “got it” on the cost of living.

The man with the ‘plan’

Monday’s speech by the chancellor marks a return (for now at least) to the original strategy, emphasising that you can’t isolate “cost of living” issues and consider them separately from a big economic plan.

In his speech, George Osborne talked about having a “plan” 23 times. It was not a case of “job done” on the economy, he said, it was not even job “half done.” And to underline that and to wave to voters who like the Tories’ tough message on welfare, he proclaimed that the Treasury has projected “£12bn of further welfare cuts are needed in the first (full) two years of the next parliament” (ie for 2016-17 and 2017-18). Those Treasury projections actually lurked in the assumptions of the Autumn Statement as did the £25bn total savings over two years. At the time, the Institute for Fiscal Studies said the chancellor’s plans amounted to needing £37/38bn of austerity measures in the first three years of the next parliament.

The point of waving these numbers around today is to make some political points: 1. There’s still more work to be done and you can’t trust Labour to do it; and 2. George Osborne’s willing to take a scythe to welfare in a way Labour wouldn’t.

Lord Ashcroft’s latest poll suggests the Tories have a 27 per cent lead over Labour on welfare policies (a 21 per cent lead over Labour on “cutting the deficit and debts”). Today was about laying the groundwork for the “tax bombshell,” “black hole” and other political battle-cries that are being cranked up again.

Cuts for cuts’ sake

Nick Clegg responded with a press conference that made you wonder how he’d ever tolerated the Tories in government. They were “extreme,” “unfair,” “not serious” and “believed in cuts for cuts’ sake.” Up with £12bn welfare savings on working age benefits he would not put.

Nick Clegg said he’d like the balance of pain in the next parliament to fall about 75/25 between spending cuts and tax rises. Ed Balls, when I bumped into him, said that sounded like the Lib Dems had just tied themselves to several billion pounds worth of tax rises (and he suspected their mansion tax would struggle to get them £1.5bn of that). He was not willing to walk into any such trap himself, he said.

I asked Mr Balls to give some indicative cuts he’d consider to prove George Osborne wrong in his claim that Labour wouldn’t be tough enough. He repeatedly mentioned his commitment to taking the winter fuel payment off the richest pensioners. But that recoups a pretty miniscule fraction of the cuts in the Treasury plans.

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