George Osborne has the reputation of being a highly political Chancellor. Those who observe him closely note that mention an idea, a policy, a dilemma and Osborne will outline the strategic implications, the likely political fallout and the historical precedents within half a second. How odd it is then that he is often the main victim of his wily initiatives.
He was being highly political when, in opposition, he proposed setting up the Office for Budget Responsibility, an independent body to present the true state of the economy. It allowed Osborne to declare: "After Labour's spin, there will be no more political interference with the facts and figures." Perhaps this did him some good in opposition. In power the political consequences are by no means rosy.
Shortly after his autumn statement tomorrow he will be upstaged by the mighty, authoritative figure of Robert Chote, head of the OBR. Chote will give a magisterial press conference in which he delivers his verdict on the state of the economy. He will be live on the rolling news channels, spelling out the gloom in front of largely reverential journalists. When Osborne makes his statement in the Commons similarly live on TV, he will be followed by Ed Balls, who, it is safe to predict, will not be reverential. Chote's verdict will be the news story by late tomorrow afternoon, the independent voice, generously established by the Chancellor, stealing the Chancellor's show.
I suspect that the political fallout of Osborne's sweeping reforms of financial services will follow a similar pattern. The Chancellor has given the Bank of England daunting, extensive regulatory powers, while scrapping the old Financial Services Authority set up by the last Labour government. Again, the theoretical political advantages for him are obvious. He blamed the Labour government for the epic financial crisis, and specifically for giving regulatory powers to the FSA. In order to ram home Labour's error, Osborne has created a new set of powers for the Bank of England which means that the next Governor will have to be an epic superhuman. No wonder Mark Carney negotiated only a five-year term. He will need to return to Canada afterwards and lie down in a darkened room for a year or two. His responsibilities are vast and the currently euphoric commentators will turn on him at some point and, as they do so, will target the Chancellor, too. The consequences of blaming the regulatory regime of the previous government will lead to another trap for the supposedly politically nimble Chancellor.
More immediately, Osborne is the main victim of his decision after the election to attempt a timeframe for deficit reduction that coincided with the electoral cycle. Two years ago, Osborne hoped he would be able to announce by 2015 a job well done in getting on top of Britain's debts, together with an expansionary Budget that would lead at last to an overall Tory election victory.
That has not gone to plan. Probably, the Chancellor will have to admit tomorrow that one of his prized fiscal rules –that net debt will be falling as a proportion of GDP by the end of the Parliament – will not be met. Politically, there is no point in setting rules unless there is a very high chance they can be met. It is not at all clear where the Chancellor thought the economic growth would come from when he announced his rules in 2010. Unlike the 1980s in the UK, there was no booming Europe on his doorstep. Unlike Canada in the 1990s, there was no soaring US economy nearby. Yet Osborne had both those models in mind partly with the hope of reaping similar electoral rewards.
Tomorrow the Chancellor faces the consequences of his political agility. Perhaps he is not a titanic political calculator and is acting out of principled conviction alone, leading his party to the edge of a cliff for the sake of the country. This theory would stand up more if the country were moving away from the cliff's edge.Reuse content