There’s no denying it anymore. The numbers do look good. Right on cue unemployment fell again this morning. The economy is growing far quicker than anyone expected, including the Office for Budgetary Responsibility. Happy days for Chancellor George Osborne.
Only up to a point. The problem is that people just aren’t feeling it. This is why Ed Milliband’s “cost of living crisis” has proved such a successful line of attack.
Will the Budget help people feel it? Upon that question will its electoral success will be judged.
Previous generations of Tory Chancellors have cynically used the Budget to indulge in giveaways as elections approach. There’s still time for a bit more of that with another Autumn Statement and another Budget to come before polling day. There’s also time to lay a few judicious traps for the opposition.
But the problem for the Chancellor is that he has his credibility staked on reducing the deficit. If he isn’t a meanie he isn’t anything. His reputation would be shot if he splashed the cash and there’s not much of that available. The deficit will remain into the next Parliament.
How, then, to ensure people feel the benefits of an improving economy so they give him the credit? The brutal fact is that the Chancellor doesn’t need everyone to feel it, no, he just needs enough of his people to feel it to get them out and voting.
The expectation is that the economy’s improvement and falling unemployment will finally start to push wages ahead of inflation before too long, at least if you work in the private sector (as most of the Chancellor’s people who are of working age do).
That will help no end, and he needs it to at least draw some of the sting from Milliband’s “crisis” line which will be repeated ad infinitum until it does.
But he can’t control it. Nonetheless he has found a way of throwing a banana or two to his people in the other ways. Tory voters tend to be older, and richer. Many of them are pensioners. Lots of them find the rakish, beer swilling, populist Ukip leader Nigel Farage seductive.
While their benefits have largely been protected - by contrast to the those aimed at the Milliband voting (or non voting) young - they’ve still had it tough because of the miserable rates their savings are achieving.
Hence the surprising radicalism in this area. ISA allowances are up to over 15k and the product will be in future more flexible allowing holders to switch between cash and shares.
There aren’t many people in Britain who can hope to save anything close to that in a year. But those that can are the Chancellor’s people.
Then there is the decision to abandon the requirement that people use their pension savings to buy annuities paying miserable rates, and the introduction of new pensioner bonds with a higher yields than might be found elsewhere.
These measures have the potential to put more money in pensioners’ pockets without much impact on the exchequer.
And again, it may be Osborne’s people that benefit.
Meanwhile, there was a nod to Tory concerns about the 40p tax rate, but only a nod. The threshold is to be a raised to £41,865, from £41,540. The personal allowance will go up to £10,500 from £10,000 to keep the Liberal Democrats happy.
In many respects Mr Osborne has been a lucky Chancellor. There have been ructions, but no further explosions in the Euro zone. The world’s economic outlook has improved and there hasn’t been a really nasty international crisis to knock things of course (although Ukraine has that potential).
But he’s also proving to be a devious Chancellor as the pensioner measures prove.
Is it enough to get enough of his people to feel the love in order to stick with him? That’s the big question. If they don’t, and Ed Milliband’s claim that average real wages are £1,600 lower than when he took office gains traction, he’s in trouble.Reuse content