It is a criticism often levelled at the Chancellor of the Exchequer, George Osborne, that he is more interested in the political side of policymaking than the economic side. And his speech yesterday to the Conservative Party conference in Birmingham did nothing to undermine that unflattering characterisation.
Mr Osborne's big announcement was his plan for the Government to impose a cap on the state benefits that any single family can receive from 2013, set at the level that the average family earns (around £26,000 a year). This was a blatant bone for the right-wing press, which constantly highlights stories of large families supposedly milking the benefits system. It was also intended to balance the announcement that child benefit will be withdrawn from families where one of the earners is a higher-rate taxpayer.
Ministers seemed vague after Mr Osborne's speech on the number of families that will be affected by the proposed benefits cap. The answer seems to depend on the effects of the cap on housing benefit that the Chancellor announced in his June Budget. But this lack of preparation makes the whole business smack of New Labour-style headline-chasing. And there is the danger of unintended consequences, as with the Coalition's cap on non-EU migrants. The manner in which Mr Osborne has pledged to remove child benefits for wealthier families – though the thrust of the policy is right at a time of inevitable cuts – will create distortions. Families with two earners on just below £44,000 a year will continue to receive the credit, but those with a single earner above that level will see it withdrawn.
It would have been fairer to simply scrap child benefit and divert funds to less well-off families in other ways. None of this is comforting. Welfare reform is too important to be carried out in this slapdash and piecemeal way. And Mr Osborne's speech did not bolster confidence that this ambitious reform effort is going to be properly funded.
On the wider economy, there was nothing new from the Chancellor. The usual soundbites – about Labour governments always running out of money and Gordon Brown failing to fix the roof when the sun was shining – were given an airing for the Tory delegates. And Mr Osborne came out with a typically misleading comparison between the debt on a credit card and the debt of a nation.
The Chancellor also reeled off a long list of those who support the timing of his planned fiscal correction, from the IMF, to the OECD, to the Governor of the Bank of England. But the official consensus on the soundness of the timing of these cuts is not as wide as he suggested. And, in any case, the conventional economic wisdom is perfectly capable of being wrong.
Mr Osborne implored his audience to "look at Ireland" to "see that the dangers have not passed". But unfortunately for the Chancellor, Ireland is teetering on the verge of the second downward leg of a double-dip recession, despite having adopted the sort of rapid public spending cuts that he claims are essential to return Britain to sustained growth. The lesson from Ireland is precisely the opposite of what Mr Osborne suggests. Ireland highlights some of the dangers of cutting too much too fast.
Mr Osborne's peroration contained an interesting shift in tone. He presented an upbeat vision of Britain "just over the horizon". The Conservative senior command appears to have been galvanised by Ed Miliband's attempt to appropriate the mantle of political "optimists" at last week's Labour Party conference. But rhetoric from Mr Osborne will not, ultimately, influence public perceptions of his economic policy. The die is now cast and the country will, soon enough, be able to judge for itself whether the Chancellor has brought the promised land closer, or pushed it further away.Reuse content