Steve Richards: Osborne is not to be underestimated

I have a golden rule which I never break: When shadow Chancellors are in trouble, take a close look at the underlying causes. Nearly always their sudden vulnerability reveals more about the fragile state of the party to which they belong than it does about their own abilities.

Perhaps Gordon Brown should summon from somewhere within his tribal soul an ounce or two of sympathy for George Osborne. When Brown was shadow chancellor he despaired when critics did not appreciate what he was trying to do. Brown was attacked regularly for not pledging to put up taxes and spending even though the policy had lost Labour four elections in a row. If his critics had listened to him carefully enough there were plenty of nods and winks to reassure them about his future plans. But still many in his party wanted another fatal dance around the politics of tax and spend.

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It seems that some influential Conservatives want more than a dance. They want to rock'n'roll the night away. In a mirror reverse of Labour in the 1990s Tories plead for public declarations that taxes and spending will be slashed, even though the Conservatives lost the last two elections making such promises. The fact that they can still plead suggests the Conservative leadership as a whole has not closed the issue down, or tamely did not choose to do so.

This is bigger than Osborne, who is one of the most talented figures in British politics. Politics is partly an art form, fairly close to music. The best politicians are like the most accomplished musicians. They sense almost instinctively what form the apparently shapeless sounds and noises will take, and what would be the most melodious outcomes for them. Osborne is good at reading the rhythms.

Excessive praise was heaped on him when he announced his proposal to abolish inheritance tax at last year's Tory conference. It was a relatively easy hit. I was more impressed with his cool reaction when the Chancellor, Alistair Darling, announced his alternative policy a few days later in the pre-Budget report. Immediately afterwards Osborne gave a calm and lucid briefing to political journalists, exposing the flaws in Darling's programme in ways that proved to be fairly prophetic as the government started to fall apart in the following months.

He is capable also of counter-intuitive insight. Osborne was one of the few Conservatives who sensed in the early autumn that a Labour leadership contest and the removal of Brown would be better for the Tories than if Brown stayed put. Osborne was sharp enough to recognise that an act of regicide and a contest would expose fatal divisions in the Labour party rather than heal them. He was right in my view. Although we will never know for sure at least he was delving below the orthodox surface.

How easy it is to blame an individual and work on the assumption that a change would make all the difference. That is a substitute for hard thinking. During the leadership contest David Davis put the case for tax cuts as a means of stimulating the economy. He insisted that tax cuts would not necessarily lead to reductions in public spending as they would help the economy to grow faster.

Although most Tory activists probably agreed with Davis, he lost the election. In the same contest Cameron appeared to be heading in a different direction. He won. The Tories would stick to Labour's spending plans. There would be no upfront tax cuts. But Cameron and Osborne never put their new case as a matter of principle. It was presented as a tactical decision with hints that tax cuts would follow once they were safely in power. The duo gave the impression that they were taking their party on, but they were not being as provocatively clear as Blair/Brown in the mid-1990s.

Now, in the midst of the transformed economic situation, several different points of view are surfacing. Ken Clarke says that he sees the case for a "fiscal stimulus" and favours a cut in VAT. John Redwood puts the case for big tax cuts. Having resolved not to enter another election campaign pledged to cut taxes out of "savings" in public spending, the Tory leadership now look for efficiencies so that they can make more or less the same argument as they did at the last election.

But amid the clamour Cameron and Osborne display more tactical insight than their critics. An opposition party cannot be judged on the implementation of policies, so it is largely dependent on symbolism. As next year there will be probably be an alarming sense of events moving out of the control of world leaders, their emphasis on prudence and responsibility is politically astute. It is possible, though by no means certain, that by then more voters will question whether Brown is pulling the strings effectively. At which point the Conservative leadership will be able to claim that it stands for an ordered, stable recovery. Tactically this is a more sensible stance than suddenly promising bigger tax cuts than Labour.

Osborne's critics are setting him up with an obstacle over which he will easily leap. They insist he must respond effectively to next week's pre-Budget report. Of course he will. He will seek to erect a divide between his apparently prudent tax cuts and the supposedly reckless alternative offered by the government. He is not going to position the Tories as the party opposed to tax cuts. Cameron made a start yesterday by reviving, a little desperately I thought, Tory slogans from the 1992 election about Labour's Tax Bombshell.

Events are moving world leaders away from laissez-faire economics and small government. Look at the German Chancellor Angela Merkel's challenge to President Bush's defence of markets at the weekend. Read the latest IMF report calling for a big increase in public spending. Wait for Barack Obama to start intervening in the US economy.

For the first time since the late 1970s the Conservatives are on the wrong side of the ideological divide. That is the challenge they must overcome in the run up to the next election. The challenge would not disappear if Osborne was sacked, which is one of several reasons why he will keep his job.

s.richards@independent.co.uk

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