22 March, 2013


All politicians have an image, of course, sometimes one well cultivated by the spin doctors, whereas sometimes the spin is tempered by popular perception. For me, when I think of Gideon 'George' Osborne I think political strategist, I think senior member of Team Cameron, but I don't think Chancellor of the Exchequer. I have suggested before that we abolish this term and call it the rather blander sounding 'Finance Minister' and I think this would rather suit Osborne.

He became finance minister nearly three years ago aged 38 and not having studied economics or indeed politics). Of course the economy was then in tatters, and still is. In a sense he has been unlucky with the forecasters, who kept giving him estimates that a return to growth was on its way, only for hopes to be dashed each time. It might have been better if they had announced a disaster - Abandon Hope All Ye Who Enter Here - on Day 1.

Le me say now I think history will be kinder to Osborne than seems likely at present. He has made mistakes but I believe some of them are mistakes that most of us would have made.

The first mistake was to underestimate the depth of the recession, one made by almost everyone, self included. It was clear by the time the coalition came to power that the last Blair government had overspent massively - even their socialist successors knew that, but no one thought that returning to growth would be such an elusive goal. Assuming that growth would return Osborne the political strategist decided to make things as easy as possible: he announced spending restraint but put the difficult cuts - those to current expenditure - back to 2014-15 when, he felt, things were bound to be better and he might even be able to cancel them. At the start the cuts would be to capital projects. In the meantime he would have gained a reputation with the markets as a fiscal conservative and Britain would keep its Triple-A rating and money would be cheap.

The backdating of current expenditure cuts was a culpable error. The time that it is easiest for a government to take unpopular decisions - and Osborne is supposed to be some wizzo political strategist - is on Day 1. Yes, the new administration can say, this is tough, people are going to suffer, but it was the fault of the last lot. Now this is perceived as being a long recession, people are calling for capital projects to be reinstated, airports, railway lines, defence expenditure and so on, which means further cuts to current expenditure. As things stand, Osborne has raised current expenditure by £600 billion in three years, but somehow got himself a reputation as a savage cutter. Not really a piece of political genius.

Again, like many commentators, self included, Osborne underestimated the heroic stupidity of Angela Merkel and the European Union. Instead of booting Greece and Portugal out of the euro they resolved for political reasons to keep them in at whatever the cost. That cost has been a lengthy recession in Europe, to which we are tied so closely. Half our exports are supposed to be to countries which can no longer afford them. So while the exporters desperately try to rebalance their sales - David Cameron has been on more export marketing junkets than any Prime Minister in history - the economy grinds along the bottom.

Osborne's solution is to flood it with money, the Bank of England shovelling out cash by buying its own debt with money it has printed. This means that savers are doubly hit: there is inflation whittling away their savings and artificially low interest rates meaning they don't earn anything on them. And who is most likely to vote Conservative? Yes, people with a bit of money.

On balance Osborne seems to be a not too bad, if unlucky, Chancellor and the most appalling political strategist.

The future? Every recession, if not adulterated by governments, holds the seeds of the next boom: asset prices fall, bad companies go out of business, wage rates fall and the economy turns upwards. This may happen before the next election in 2015. History will judge how Osborne has affected it.

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