John Rentoul: Mr Osborne's hand of trumps

Points won by Labour when the coalition falters count for little while the Chancellor holds the Budget cards

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The Budget next week is the last chance for Government and Opposition to frame the economic argument before the spending cuts start to bite. Our ComRes poll today suggests that public opinion is going against the Chancellor. Only 23 per cent agree that he is "on my side" in dealing with the country's economic problems. By contrast, nearly half of our respondents think that, when Ed Miliband talks about the "squeezed middle", he is talking about "people like me and my family". The Labour leader seems to have struck a chord with his warning of a "cost of living" crisis.

That impression is deceptive, however. George Osborne has two advantages: one short term and one long term. On Budget day, he has the advantage of being in power. He has better information than the Opposition about the state of the public finances. He can give back some of the extra taxes brought in by high oil prices by cancelling the penny on the price of petrol planned by Alistair Darling, his predecessor. He can pay off more of the national debt than planned – I do hope he does not pay it "down" – and perhaps have a little to spare for an eye-catching initiative or two. Some of these will be stupid, such as enterprise zones, a ghastly bureaucratic way of selectively cutting "red tape". Some of them will be empty rhetoric, such as the "growth agenda", as if most chancellors devote themselves purposely to holding back economic growth. Some of them will be clever.

Never forget that Jeremy Heywood is the second most important civil servant in the land. Now permanent secretary in No 10, subordinate only to Sir Gus O'Donnell, the Cabinet Secretary, in 1992 Heywood was private secretary to Norman Lamont. Heywood was the brains behind Lamont's coup de théâtre in his pre-election Budget, bringing in a new lower rate of income tax of 20p on the first £2,000 of taxable income, instead of cutting the basic rate of 25p. It outdid John Smith's shadow budget in helping the low-paid, and left Labour with a high-tax message instead of a social-justice one. We know what happened in the election a few weeks later.

Osborne's other advantage on 23 March is that, by convention, the Leader of the Opposition rather than the shadow chancellor responds to the Budget speech. Last year, Harriet Harman, who was then Labour's acting leader, did it well enough to prompt one Conservative commentator to "wonder regretfully why she did not stand for the Labour leadership". Actually, Harman's limited success was down to Yvette Cooper, who understood what Osborne was saying and who acted as Harman's prompter. If anyone, it should have been Cooper's lot to "wonder regretfully" about what might have been, because she really could have stood for the Labour leadership and won.

Next week may be similar, with Ed Miliband being prompted by Cooper's husband, Ed Balls. The Balls-Cooper axis is where the real power lies in the Labour Party. Last week, Cooper, the Shadow Home Secretary, had to respond to a speech by Sadiq Khan, the Shadow Justice Secretary. Khan, taking his cue from the leader, said we should reduce the prison population. Cooper, recognising that this would be lovely, but could not be the object of government policy, gave a speech affirming that the party is still "tough on crime and on the causes of crime".

Next week, Balls will be in charge of the reply to the Budget, but his leader will deliver it. The scope for underperformance is large.

That is especially so when we consider Osborne's long-term advantage, which is that Labour has a holding position, not an argument.

The cost-of-living argument is not an argument; it is just an opposition posture. The weakness is not just that, if Labour say "more should be done" to cut the price of petrol, for instance, everyone knows that the money has to come from somewhere else. The weakness is that people may feel squeezed, but they know that is the price of the boom that went on too long, and they blame Labour rather than the coalition for the state of the public finances.

That won't last, but then neither will the squeeze. It is about to get worse. Next month, the rise in National Insurance contributions will hit everyone earning more than £20,000 a year. But there are four years to the election. And when the squeezed middle starts to feel the squeeze easing, what then happens to Miliband's cost-of-living crisis?

Accusing the Coalition of cutting too far too fast is not an argument, either. The issue at an election is: who do you trust to manage the economy? Even if the coalition does cut too far and too fast, once Osborne gets the deficit down, is Labour going to say, Let it go back up and we'll cut it again more slowly?

Several members of Labour's shadow cabinet have recovered their appetite for politics recently, sensing that David Cameron is not as good as they thought he was. The Libyan crisis and a succession of U-turns have convinced them that he can be portrayed as incompetent – and never mind that this contradicts their other line of attack, which is that the Tories are right-wing ideologues hell-bent on shrinking the state.

They ought to read Alastair Campbell's diaries of the 1997-99 period when, in retrospect, Tony Blair seemed to carry all before him. The sheer disorganisation and confusion of No 10 in the face of a relentless onslaught of media crises, many of which came out of the blue, renders the serenity of the period, as recollected in tranquillity, unrecognisable.

The big lesson is that so much of the day-to-day hardly matters at all in the long run. A Budget is one of the few political events that cuts through to the public, and all the cards are in Osborne's hand. By the time of the election, a Labour complaint that the cost of living is too high will have lost what little meaning it might now have.



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