Bruce Anderson: Osborne has to find the right language

It is where the politics come in. The Chancellor has to get the tone right. While not shirking the bad news, he must persuade us that it will not last forever

Share
Related Topics

Economics is commonsense, in theory. The task facing economic policy-makers is easy to summarise: keeping a balance. They should aim for full employment and low inflation; for a sensible tax regime which finances the necessary functions of government without discouraging enterprise. Above all, their goal should be stability, which will encourage business to invest, thus ensuring steady growth and rising living standards.

That all sounds easy, but there is a basic problem. Theory does not equate with practice, because economics is about human beings, a species among whom commonsense is uncommon, and who find balance hard. As a result, economic policy is often beset by contradictions and paradoxes: rarely more so than in Britain today. There are some obvious examples. Everyone agrees that the banks need to rebuild their balance-sheets, especially as they may be threatened by a new set of toxic liabilities from the eurozone. Everyone also agrees that it is vital for banks to go on lending. We know that on both sides of the Atlantic, the property market turned into a bubble. Yet the recent increase in UK mortgage lending provided grounds for cautious optimism; perhaps the recovery is under way.

But Britain is not an economic autarchy. Our prospects depend on global conditions, which are not encouraging. Arthur Laffer, one of the wisest living economists, has recently argued that the US recovery – such as it is – is under threat from tax increases. A number of George Bush's tax cuts had sunset clauses, under which they will expire at the end of this year. Thereafter, there will be a reversion to the old rates. Professor Laffer believes that as a result, there is a temporary acceleration in economic activity to take advantage of the benign tax regime, and that there will be a fall-back after 1 January. It sounds alarmingly plausible. We can only hope that this one of the rare occasions when the Professor is wrong. When America stutters, the world economy stalls.

Nor is the US the only potential stutterer. It seems inconceivable that the pound will not strengthen against the euro. The markets will pay the UK a compliment. It is not one which our exporters or our domestic tourist industry will welcome. Then there is China. Chinese car workers have gone on strike in Japanese-owned car factories. Who would have predicted that 10 years ago? Is this to be welcomed as an inevitable part of economic and social modernisation? Or does it presage chaos? A great deal hinges on that answer. The world needs a strong, successful China.

On his recent visit to China, George Osborne found common ground, both on trade matters and on Jane Austen. This must have been a welcome interlude for the Chancellor, amidst his Budget preparations. But at least he knows what he has to do on Tuesday. It is simple, really. He must make the speech of his life and find a way through the confusion.

All sensible people agree that UK government spending is unsustainably, perilously high and that it must be drastically reduced as a proportion of GDP. But any form of economic activity is better than no activity. In the short-term, throwing hundreds of thousands of public servants out of work would merely add to the cost of government while cutting its revenues. There is a similar difficulty with tax increases. Although they are essential, they risk reducing demand at a moment of economic frailty. So how does Mr Osborne sort out all that?

He does have some assets. The public has been softened up. As they would say in the markets, pain has been discounted. Admittedly, he does not enjoy one advantage which most of his predecessors had. Even in the worst of times, there was usually some good news, or at least a mitigation of anticipated hardship. This time, that seems unlikely. Pelion will be piled on Ossa. Even so, the Chancellor will be able to draw on the authority which the new government has acquired.

At the highest level, nothing is effortless, but it can seem so when a master performer is on the stage. Over the past few weeks, David Cameron has been masterly. It is hard to think of any Prime Minister who could have equalled, let alone bettered, his response to the Saville report. Indeed, he saved Lord Saville from his critics. Twelve years, £191 m, to dissect one hour's events: lots of people were preparing to denounce the judge's procrastination, the lawyers' rapacity and the thoughtless way in which Tony Blair set up the inquiry. Then Mr Cameron spoke, and it all seemed worthwhile.

It may be that the Prime Minister will be able to provide top cover for George Osborne as well as for Mark Saville. There is now a sense that this government is now securely established and knows what it is doing. Even so, the Chancellor will have to add to that, as well as draw from it. There is still an unanswered question: is George Osborne Norman Lamont II or Arthur Balfour II?

Like Mr Osborne, Chancellor Lamont had a good intellect, political shrewdness and an impressive grasp of his portfolio. But he never acquired enough political weight. In 1886, though Arthur Balfour's intellectual powers were acknowledged, he was often dismissed as a languid lightweight and was nicknamed "pretty Fanny". He was appointed Chief Secretary for Ireland, and within a couple of years it was "bloody Balfour", a reputation which helped carry him to the Premiership. Mr Osborne's developing reputation will be crucial for the fortunes of the Cameron Premiership. On Tuesday, his figures must seem convincing: his political touch, assured.

Inevitably, the figures will be a leap in the dark. Although the government deficit sounds hideously high, it is only a residual: a mere gap between two even larger figures, expenditure and revenue. The future prospects for both of them are ensnared in variables and assumptions, most notably on growth. If there is a recovery and a revival of growth, life will become much easier. When the economy is moving ahead, tax receipts always exceed expectations while welfare spending comes in under budget. But if growth falters, everything goes wrong.

There is very little that the Chancellor can do to promote growth. So many of the factors are not under his control. The two most important are the animal spirits of the British middle classes, and luck. This is where the politics comes in. He has to get the tone right. While not shirking the bad news, he must persuade us that it will not last for ever. Although it is difficult to find fresh ways of expressing those traditional Conservative themes, opportunity and enterprise, Mr Osborne must find the language. The speech needs three phases: grimness, aspiration, inspiration. On Friday, commemorating De Gaulle, the Prime Minister sounded Churchillian. George Osborne is about three decades of cigar-smoking away from a Churchillian voice, but he must do his best.

In 1981, Geoffrey Howe's Budget was denounced by 364 economists. He and Margaret Thatcher were embattled. But they fought their way through. That Budget proved to be the launching pad for an economic recovery. In her Memoirs, Lady Thatcher claims that it was a second Battle of Britain. This government must now win a third one.

React Now

Latest stories from i100
Have you tried new the Independent Digital Edition apps?
iJobs Job Widget
iJobs General

Austen Lloyd: Commercial / Residential Property - Surrey

Excellent Salary: Austen Lloyd: SURREY MARKET TOWN - SENIOR PROPERTY SOLICITOR...

Recruitment Genius: Graduate Programme - Online Location Services Business

Negotiable: Recruitment Genius: What do you want to do with your career? Do yo...

Recruitment Genius: Senior QC Scientist

Negotiable: Recruitment Genius: This company is a leading expert in immunoassa...

Recruitment Genius: Development Scientist

Negotiable: Recruitment Genius: A Development Scientist is required to join a ...

Day In a Page

Read Next
File: David Cameron offers a toast during a State Dinner in his honour March 14, 2012  

I saw the immigration lies a mile off - and now nobody can deny it

Nigel Farage
The Uber app allows passengers to hail a taxi with a smartphone  

Who wouldn’t like a sharing economy? Well, me, for one

Mary Dejevsky
Homeless Veterans Christmas Appeal: ‘We give them hope. They come to us when no one else can help’

Christmas Appeal

Meet the charity giving homeless veterans hope – and who they turn to when no one else can help
Should doctors and patients learn to plan humane, happier endings rather than trying to prolong life?

Is it always right to try to prolong life?

Most of us would prefer to die in our own beds, with our families beside us. But, as a GP, Margaret McCartney sees too many end their days in a medicalised battle
Thomas Cook's outgoing boss Harriet Green got by on four hours sleep a night - is that what it takes for women to get to the top?

What does it take for women to get to the top?

Thomas Cook's outgoing boss Harriet Green got by on four hours sleep a night and told women they had to do more if they wanted to get on
Radio 4 to broadcast 10-hour War and Peace on New Year's Day as Controller warns of cuts

Just what you need on a New Year hangover...

Radio 4 to broadcast 10-hour adaptation of War and Peace on first day of 2015
Christmas 2014: 10 best educational toys

Learn and play: 10 best educational toys

Of course you want them to have fun, but even better if they can learn at the same time
Cameron, Miliband and Clegg join forces for Homeless Veterans campaign

Cameron, Miliband and Clegg join forces for Homeless Veterans campaign

It's in all our interests to look after servicemen and women who fall on hard times, say party leaders
Millionaire Sol Campbell wades into wealthy backlash against Labour's mansion tax

Sol Campbell cries foul at Labour's mansion tax

The former England defender joins Myleene Klass, Griff Rhys Jones and Melvyn Bragg in criticising proposals
Nicolas Sarkozy returns: The ex-President is preparing to fight for the leadership of France's main opposition party – but will he win big enough?

Sarkozy returns

The ex-President is preparing to fight for the leadership of France's main opposition party – but will he win big enough?
Is the criticism of Ed Miliband a coded form of anti-Semitism?

Is the criticism of Miliband anti-Semitic?

Attacks on the Labour leader have coalesced around a sense that he is different, weird, a man apart. But is the criticism more sinister?
Ouija boards are the must-have gift this Christmas, fuelled by a schlock horror film

Ouija boards are the must-have festive gift

Simon Usborne explores the appeal - and mysteries - of a century-old parlour game
There's a Good Girl exhibition: How female creatives are changing the way women are portrayed in advertising

In pictures: There's a Good Girl exhibition

The new exhibition reveals how female creatives are changing the way women are portrayed in advertising
UK firm Biscuiteers is giving cookies a makeover - from advent calendars to doll's houses

UK firm Biscuiteers is giving cookies a makeover

It worked with cupcakes, doughnuts and macarons so no wonder someone decided to revamp the humble biscuit
Can SkySaga capture the Minecraft magic?

Can SkySaga capture the Minecraft magic?

It's no surprise that the building game born in Sweden in 2009 and now played by millions, has imitators keen to construct their own mega money-spinner
The King's School is way ahead of the pack when it comes to using the latest classroom technology

Staying connected: The King's School

The school in Cambridgeshire is ahead of the pack when it comes to using the latest classroom technology. Richard Garner discovers how teachers and pupils stay connected
Christmas 2014: 23 best women's perfumes

Festively fragrant: the best women's perfumes

Give a loved one a luxe fragrance this year or treat yourself to a sensual pick-me-up