Osborne’s Blues?

It’s the Budget on Wednesday. George Osborne’s sixth outing at the Despatch Box (not including Spending Reviews or Autumn Statements) could be his last, if the Conservatives don’t win or lead the Government that emerges after the 7th May. And the political stakes are huge with no guarantee of either.

In many ways, most of Osborne’s dreams have been realised as the parliament draws to a close, formally ending on the 30th May. The economic recovery is well underway, wages are rising and individuals and businesses are both feeling more confident about the future than at any point in the last five years. If Bill Clinton was right when he said that the biggest election issues was ‘the economy, stupid’, then it should be plain sailing for Osborne and the Conservatives.

The fact that it isn’t, suggests that his party will be looking to Osborne to make the difference when he delivers the Budget on Wednesday. The Long Term Economic Plan or #LTEP on Twitter will be the political script. ‘Plan A’ has worked (sort of). ‘Let us finish the job’. ‘Competence or Chaos’ TM etc etc. But as the BBC’s David Cowling put it at a recent UCL seminar the two most important questions in the election are 1) is the economy improving? and 2) is it improving for me?

Osborne’s job this week is to martial the economic evidence to answer the first question and offer a bevy of announcements to persuade more people to believe the second. Ideally they need to be persuaded in Ashcroft’s marginals rather than in the traditional Conservative heartlands. Expect name checks for towns and cities in the Midlands and the North and populist as well as longer term measures for their benefit.

This is where Labour are hoping that he fails to finish the job. In their favour, Osborne’s Budgets haven’t always been a roaring success – there was the pasty tax ‘omnishambles’ of 2012 for a start. But he’s become steadier on his feet and less shrill in tone ever since. The Treasury is also happier as he’s stuck to his austerity script and to tough choices. The Budgets have become progressively more Brown like (and Treasury like) with a renewed interest in the longer term and in structural issues like productivity, investment, human capital (the ‘Five Drivers of Productivity’ anyone?)

The Treasury Permanent Secretary, Sir Nick Macpherson warned on Friday that he might call in the police if any budget announcements were leaked. And yet there was George on the Marr Show on Sunday, promising not to reveal his Budget, while sneaking out stories on annuities and on business rate reforms over the next 24 hours. But I doubt that Macpherson has called Scotland Yard, given that the Budget now takes place over the entire week; Saturday and Sunday for key soundbites and narrative, a few trails on growth forecasts and some key policy announcements on Monday and Tuesday (see Annuities, Business Rates Review, Apprenticeship pay and Minimum Wage rises), the speech set piece on Wednesday and then the Departmental announcements and visits in a hard hat for Thursday and Friday, accompanied by press reaction and detailed briefings (including reaction from IFS and other leading economic commentators).

So what might Osborne announce? He’ll want the OBR to give him some decent numbers in their forecasts and increased tax receipts to give him some spending flexibility. It looks like both will happen and these fit his and Lynton Crosby’s #LTEP script. Both may allow him to reveal a big ticket commitment on income tax thresholds or tax cuts elsewhere. A commitment on Inheritance Tax would replay his 2007 Party Conference speech that transformed Conservatives polling and led to Gordon Brown’s postponing of his planned snap election that Autumn. However the Tories may want to save that promise for a manifesto free of Lib Dem influence. Further raises in income tax thresholds for the low paid will be more coalition friendly and could provide the big headline or the final ‘rabbit’ of this Parliament.

But despite his promise of no giveaways and gimmicks, there almost certainly will be. He’ll find it hard to avoid either when thinking about how he might please pensioners and the low paid. The Treasury has always liked beer and wine (especially British) and we might see a cut in duty on both. A commitment to more house building? Perhaps even something for the motorist? Dare Osborne try a Top Gear line or will he prefer a kitchen gag?

Of more interest to universities and cities and regions beyond London, may be the already rehearsed lines on a ‘truly national recovery’ and supporting science:

‘…this Budget is all about securing a truly national recovery – from building a Northern power house, connecting up other regions of our country, committing to long-term plans that support science and high speed transport, making sure that all parts of our country feel the benefits of the economic recovery, and that’s what this Budget will be. So no giveaways, no gimmicks, a Budget for the long-term.’
Osborne on Andrew Marr Show, BBC1 Sunday 15th March 2015

So we can expect more science and more on the North – HS3? New deals for science and devolution in Leeds and Liverpool? Confirmation of deals in Manchester? New announcements for Birmingham and Nottingham? A Midlands ‘powerhouse’ perhaps? Although economically, Birmingham in particular is more connected to London and the Greater South East than to the Northern Cities. But good as this all undoubtedly is, Osborne has to appeal as much to the kitchens of Coronation St as to the universities and scientists of the North.

At the recent HE hustings organised by THE, HEPI, Universities UK and the Open University, Greg Clark promised additional support for part time students with a ‘watch this space’ answer. With Labour’s recent pledge to increase grants and student support, we might see something there too as Osborne won’t want to see Miliband’s announcement go unchallenged. He has after all championed higher education and the increase in full time numbers. More science and health announcements (or re announcements) are likely, given that there is a bit of slack left in the science capital coffers.

But his main message will be that his ongoing stewardship of the economy (with perhaps a little nod to Danny Alexander) allows him to ‘share the proceeds of growth’ just a little more. So while he’ll still look to grab some headlines with further swingeing cuts to Welfare and to non protected government spending, Osborne will also claim that generous economic forecasts allow him to increase earnings thresholds for the lowest paid, increase apprenticeship pay and the minimum wage and offer a few quid here and there for drinkers, drivers, builders, scientists and pensioners. That’s a bit more Hammond and May than Clarkson and definitely more Weatherfield than Chipping Norton.

Some say… it’s George Osborne’s appeal to this mix of interests that will carry the Conservatives through the General Election and back into power.

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3 thoughts on “Osborne’s Blues?

  1. Hard to square investment in human capital with the devastation of post 19 FE budgets isn’t it, and little prospect of change (beyond fig leaf apprenticeships) whoever wins in May?

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  2. Indeed Alan. Of course those cuts are a bad idea and inevitably lead to a reduction in skills of one kind or another. I guess the issue is how and why the Chancellor and the Treasury can keep talking about human capital, productivity and so on while taking large chunks of cash out of BIS? As you say this only looks like it’s going to get worse in the next Parliament. Does he know and think it doesn’t matter or does he know and think he won’t be challenged on it? Or is it more ideological ie ’employers and individuals will pay if it’s worth it’…?

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  3. I suspect its because Osborne has always been more of a politician than an economist and knows that he can cut adult FE without much of a backlash. I doubt whether he cares a fig about its economic impact

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