What does Osborne want?

Aaron Bastani

There were several surprises in George Osborne’s sixth autumn statement as chancellor of the exchequer, but the announcement that grabbed the headlines was the (temporary) reversal on cutting working tax credit. For some commentators, that volte face, and the chancellor’s performance more broadly, was a display of unparalleled acumen. Here was a politician, they purred, at the top of his game, an exponent of statesmanship who could seize the centre ground while almost issuing an apology. For others, including the shadow chancellor, John McDonnell, Osborne’s offer was a political capitulation of the first order, a premier cru bottlejob by a champagne charlie. The truth, unsurprisingly, is somewhere in between, but what shouldn’t be overlooked is Osborne’s ambition for the top job.

The scale of the turnaround on tax credit is, in the details, unimportant. In the long term, the reforms will still be implemented, as part of the delivery of universal credit by 2020. But Wednesday was an important moment all the same: anti-government protest over the last five years has met with scant returns. Demonstrations, strikes, even the rise of three insurgent parties to the forefront of British politics didn’t prevent a Tory majority last May.

Three factors explain both Osborne’s backtracking on tax credit reform and his major concessions to the police and armed forces. First, he could claim to be able to afford it, as the Office for Budgetary Responsibility now estimates that the Treasury will be £27 billion better off by 2020 because of increased revenue from existing taxes. That figure may be optimistic – it wouldn’t be the first time the OBR has got its sums wrong – but it allowed the chancellor to promise to eliminate the deficit by 2020 while appeasing important constituencies.

Second, the government has a working majority of only 12. With a Labour leadership opposed to tax credit reform, Osborne knew he would have to rely on his own MPs, many of whom had publicly criticised the reforms.

Third, and most important, the chancellor would like to be the next prime minister. In the home stretch to being anointed Cameron’s successor as leader of the party and possibly the country, any molehill in danger of turning into a mountain had to be dealt with immediately, even if that meant public contrition.

The chancellor’s ‘unexpected’ decisions can be explained, as so often in politics, by a combination of political expediency and personal ambition. Corbyn and McDonnell made a difference to the chancellor’s changing his mind, but so did Boris Johnson – a public critic of the tax credit reforms – and Theresa May. The chancellor outflanked the home secretary in wooing the police because May – along with Johnson – will be one of Osborne’s most potent challengers for the leadership.

All of which creates a curious setting for British politics between now and 2020. The anti-austerity movement, arguably for the first time, has wrung a major concession from the chancellor. It has done so with a radical leader of the parliamentary opposition putting pressure on a slender governing majority. The situation was very different for the first Cameron government, which in part explains the coalition's lack of inhibition in pushing through public sector cuts and wage restraint.

It may now be the case that if you push hard enough, the chancellor will back-pedal. That has proved true for the police winning immunity from further cuts, and the anti-austerity movement more broadly in regard to tax credit reform. What is new, along with the small majority and Corbyn’s arrival, is that Osborne is auditioning for the top job. I suspect tax credit reform won’t be the last U-turn we’ll see between now and the next general election.


  • 27 November 2015 at 8:43pm
    streetsj says:
    I have thought since 2010 that much of the most austere rhetoric has been directed at the financial markets. Meanwhile reality is very different as public spending continues oto rise. The opposition - such as it is - is left bemoaning the fact that the chancellor has missed his deficit targets. So? What?They think he should have cut harder?
    The harsh reality is that the government can control only a few things. There is massive inertia in most government spending. The revenue is largely outside its control as it is a function of global/european economies (trying to increase taxes always yields less than expected as players adapt). Osborne is foolish to try to tie policy to a number/target when so little can be determined by the government.
    Nevertheless the direction of travel is important and here the clear truth is that Osborne is a shameless pragmatist/politician/opportunist and not an ideologue at all. He is quite happy to concede/U-turn if the political calculation ends in his favour. The attack on buy-to-let landlords is the perfect example. The B2L landlord should be a paradigm of conservative values/ Typically he is a hard working person who wants the best for his family and rather than trust those sheisters in the city he is going to buy another castle for his pension/family/nest egg. And yet twice nowOsborne has tried to a tilt at his typical Modeo-made-good-man. First with debt tax relief and now with stamp duty.
    Is he trying to stop these awful people from crowding out the innocent, would-be first time buyer or trying to raise revenue. He seems to want it both ways. The rhetoric says we're going to stop it, the figures say we're going to raise another £1bn from it.