“Britain’s economic plan is working.” It was the first sentence of George Osborne’s Autumn Statement and it is bound to feature at the start of the Conservative Party manifesto in 2015.
The Chancellor’s claim is, to put it politely, open to question. His plan was supposed to clear the deficit by 2015; now we know it will not happen until 2019. It allowed for public borrowing of £60bn this year. The figure will now be £111bn. “We haven’t really stuck to Plan A but George is never going to admit that,” one Cabinet minister confided. “We have had to show much more flexibility. But we are finally getting there.”
Labour is frustrated. It feels as if it has won the economic argument because the Coalition’s spending cuts delayed the return to growth. But Mr Osborne’s assured performance on Thursday was that of a man confident that he has won the argument, while Ed Balls, the shadow Chancellor, was cast in the role of the loser.
Labour is right to feel a sense of injustice, but wrong to show it. By the 2015 election, I doubt voters will be interested in a backwards-looking argument about the Coalition’s “three wasted years”, especially if the economy continues to grow and wages finally rise by more than inflation next year. Elections are usually about the future. So Labour’s energies would be better devoted to making up its mind on what it will offer people. Labour cannot afford to look like a party fighting the last war.
Labour will need some fancy footwork to sidestep the trap the Chancellor laid for it by announcing a Commons vote before the election on new fiscal rules to entrench further cuts in the next parliament. It was a clever chessboard move of which Mr Osborne’s auld enemy Gordon Brown would have been proud. Labour risks looking irresponsible on the deficit if it opposes the new “charter for fiscal responsibility”. If Labour supports it, the Tories will challenge the “two Eds” to reveal their spending cuts, notably on welfare (for good measure, the subject of a separate cap). If Labour refuses to spell out its cuts, the Tories will unleash their favourite weapon: “Labour’s tax bombshell”.
Labour wants to look tough on the deficit, but does not want to look like a pale imitation of the Tories. So Mr Balls will set his own fiscal rules before the election. Labour managed to avoid a similar trap ahead of the Government’s spending review this year, by pledging to stick within the Coalition’s day-to-day spending limits for the first year. That is why Mr Osborne moved the goalposts on Thursday, laying another trap for Labour. “If the Tories think we are stupid enough to walk straight into it this time, they are even more stupid than I thought,” growled one senior Labour figure.
The Chancellor, who was a little too bullish when the growth figures turned positive this autumn, reined himself in on Thursday to avoid too much crowing. But Mr Balls judged that Mr Osborne showed too much hubris for voters struggling with the cost-of-living crisis. Labour suspects that will underline the Tories’ biggest weakness – looking “out of touch” to ordinary people.
Yet public opinion may be shifting slowly in the Government’s favour as growth returns. The polls suggest people feel that the worst is over; they are more optimistic about their own prospects than they were a year ago. They believe the deficit had to be tackled, although they are not convinced it has been done fairly. Unusually, the passage of time has not reduced the number of people who blame the country’s economic problems on Labour.
The polls also suggest that voters’ heads may rule their hearts; that they prefer a “smart but mean” party to a “nice but dim” one whose economic competence they doubt. That, on the face of it, is good news for the Tories.
It explains why Team Osborne is delighted that the Autumn Statement switched the spotlight back to the deficit and away from living standards. The Chancellor and Nick Clegg did not want to go head-to-head with Labour on living standards, but David Cameron panicked over Ed Miliband’s pledge to freeze energy prices. “There was a schism between Cameron and Osborne,” one government insider admitted.
Mr Osborne will not have a big set-piece occasion every week. The Coalition’s challenge is to stick to its “big picture” message and not get sucked into hand-to-hand combat when Labour comes up with another clever cost-of-living wheeze.
Mr Osborne will also need to deliver on his promise of a “responsible recovery for all”. If there is no “feel-better” factor among ordinary people by 2015, the greater the risk of the “out of touch” label sticking.
Indeed, there is a danger that both main parties will be out of step with public opinion: Labour if it harps on about “three wasted years”, the Tories if they appear in denial about living standards. Both will already struggle to win more than 40 per cent of the vote and an overall majority. At present, I wouldn’t bet on either main party doing that in 2015, which points to another hung parliament.
Between now and 2015 we will see a battle between two competing narratives, as the Tories focus on finishing the job on the deficit and Labour highlights living standards. The election could turn on the question uppermost in voters’ minds at the polling station: will they be thinking about their own prospects or the state of the economy generally?
Mystery of the attack on Darling's No campaign
One of the mysteries of the week was an authorised attack by someone close to David Cameron on Alistair Darling’s “comatose” leadership of the campaign to persuade Scots not to vote for independence in next autumn’s referendum.
Although Downing Street apologised to Mr Darling, the press reports set the cat among the pigeons and gave the Scottish National Party a much-needed boost. They caused bemusement in Scotland, where the former Labour Chancellor is seen as having a good war and the No campaign maintains a healthy lead in the opinion polls.
Rumours fizzed around Westminster about the source of the attack. Was it a plot by right-wing Tories to sabotage the No camp, so Labour loses its Scottish MPs after independence and the Tories can win a Commons majority? A bit far-fetched. Do the Tories want to lead the No campaign? Barmy when they are hated by many Scots.
Were some Tories trying to undermine Mr Darling because they fear Ed Miliband will dump Ed Balls and make him shadow Chancellor before the 2015 election? Possibly. While Mr Miliband and Mr Darling did have lunch together at the Commons yesterday, I doubt very much that will happen.