Steve Richards: Economically it's neutral, politically it's radical

How each party moves now will determine their fate. We are in the most important months of this parliament

Share

The political fallout from tomorrow's Budget will be at least as significant as its impact on the economy. The stakes are very high for all three parties, partly because of the timing. None of them is yet clearly defined in this electoral cycle. They still have some freedom of manoeuvre before voters' perceptions become more clearly formed and the next election moves into view. The way each of them chooses to use their relative freedom now will determine their fates. Politically, we are entering the most important few months of this parliament.

In their very public negotiations, the Liberal Democrats both fight for their lives and live in hope that there are rewards to come. From the turn of the year, Nick Clegg has been putting the case for raising tax thresholds, exempting the low-paid from income tax, and giving a tax cut to other earners, too. Instead of accepting ownership of the entire Budget, as happened last year, Clegg plans to portray this Budget as "a deal" in which his party has secured some progressive, fair policies and has had to accept, in return, Osborne's need to appease the Tory right.

Indeed, those close to Clegg suggest that the Lib Dem's public demands have made it more necessary for the Chancellor to move rightwards in response. They claim to be relaxed about the political consequences of this new dynamic, arguing that as the Conservative leadership moves rightwards and Labour moves to the left under Ed Miliband, the Lib Dems can claim the centre ground.

This is the dream scenario for the Lib Dems, the prospect of grateful voters declaring: "Thank God, they are there to rein in the Tories now and perhaps Labour in the future." We shall see if voters come round to such a view. At the moment, the polls do not detect any sign of gratitude. Few voters seem to recognise their claims to distinctiveness and regard them as colluding in the march rightwards. In my view, their backing for the NHS bill is more dangerous than their qualified support for an economic package in which high earners get an income tax cut, but the Budget is a more forensic test of Clegg's new strategy of distinctiveness. His approach to NHS reform was much messier, beginning with outright support and ending with his tame declaration that it was not a Lib Dem bill.

For Osborne the Budget was always going to be a delicate exercise, with the right as vocal in advance as the Liberal Democrats were. David Davis, the former shadow Home Secretary and leadership candidate, is among several senior backbenchers who plan to speak out publicly if Osborne does not deliver on deregulation, the top rate of tax and other measures they regard as essential to generate growth. The likes of Davis and John Redwood have met to discuss a co-ordinated response. Both regard this Budget as the last opportunity before the election for some meaty measures. Davis believes that the Conservatives will lose the next election unless Osborne responds tomorrow.

Fortunately for them, Osborne is inclined to act in ways that will meet their approval. It has become a cliché to describe him as a tactician. This is both a red herring and an insult to Osborne, who evidently has strong convictions. He does not only see politics as a game. Cutting the top rate of tax, exploring ways of ending national pay bargaining, targeting child benefit, speeding up planning, sweeping deregulation, and toll roads are all risky for different reasons. But Osborne, who tends to look back for guidance, has read Geoffrey Howe's Budget in 1981 and Nigel Lawson's in 1988; both delivered some distance from the next election, when tough, risky decisions could still be taken. In the electoral cycle, this is Osborne's equivalent.

Within the Coalition, he has secured the space to act by lifting the tax threshold and attempting another clampdown on tax avoidance, both policies he agrees with anyway. The Lib Dems can call this a deal, but Osborne must be very content with his side of the bargain.

Even so, the new political dynamic in the Coalition is dangerous for the Chancellor and his party. Although implementing policies on the right, the genius of David Cameron and Osborne has been to convince much of the media and some in their party that they are expedient centrists without strong views of their own. The contortion will become harder with Clegg and others claiming persistently that the Conservatives are less right wing and "nasty" only because of them.

The contortionists can take some comfort from Labour's dilemma. Miliband and his bewildered party need to make some very big calls on tax and spend. Will Labour go into the next election pledged to put up income tax for high earners as it did in the 1980s and 1992 elections it lost? Tough decision for a party unsure why it won three elections, let alone why it lost last time. There will be much sincere indignation from Labour tomorrow. Indignation is not an alternative economic policy. A fiscally neutral Budget from a Chancellor trapped partly by his own programme of austerity carries huge political risks for all three parties.

s.richards@independent.co.uk / twitter.com/steverichards14

React Now

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

Recruitment Genius: Business Development Executive / Digital Marketing Executive

£26000 - £35000 per annum: Recruitment Genius: A luxury beauty house with a nu...

Recruitment Genius: Housekeepers - Immediate Start

£8 per hour: Recruitment Genius: This company are currently recruiting new exp...

Recruitment Genius: Head Concierge

£25000 - £28000 per annum: Recruitment Genius: This award winning Property Man...

Recruitment Genius: Content, SEO and PPC Executive

£20000 - £25000 per annum: Recruitment Genius: A fantastic opportunity has ari...

Day In a Page

Read Next
 

Clean energy should be our mission to the moon

Martin Rees
Angela Merkel and David Cameron say goodbye in the Bundeskanzleramt after their meeting in Berlin, Germany, 29 May 2015  

The complacency of Europhiles could lose them the referendum

Steve Richards
On your feet! Spending at least two hours a day standing reduces the risk of heart attacks, cancer and diabetes, according to new research

On your feet!

Spending half the day standing 'reduces risk of heart attacks and cancer'
Liverpool close in on Milner signing

Liverpool close in on Milner signing

Reds baulk at Christian Benteke £32.5m release clause
With scores of surgeries closing, what hope is there for the David Cameron's promise of 5,000 more GPs and a 24/7 NHS?

The big NHS question

Why are there so few new GPs when so many want to study medicine?
Big knickers are back: Thongs ain't what they used to be

Thongs ain't what they used to be

Big knickers are back
Thurston Moore interview

Thurston Moore interview

On living in London, Sonic Youth and musical memoirs
In full bloom

In full bloom

Floral print womenswear
From leading man to Elephant Man, Bradley Cooper is terrific

From leading man to Elephant Man

Bradley Cooper is terrific
In this the person to restore our trust in the banks?

In this the person to restore our trust in the banks?

Dame Colette Bowe - interview
When do the creative juices dry up?

When do the creative juices dry up?

David Lodge thinks he knows
The 'Cher moment' happening across fashion just now

Fashion's Cher moment

Ageing beauty will always be more classy than all that booty
Thousands of teenage girls enduring debilitating illnesses after routine school cancer vaccination

Health fears over school cancer jab

Shock new Freedom of Information figures show how thousands of girls have suffered serious symptoms after routine HPV injection
Fifa President Sepp Blatter warns his opponents: 'I forgive everyone, but I don't forget'

'I forgive everyone, but I don't forget'

Fifa president Sepp Blatter issues defiant warning to opponents
Extreme summer temperatures will soon cause deaths of up to 1,700 more Britons a year, says government report

Weather warning

Extreme summer temperatures will soon cause deaths of up to 1,700 more Britons a year, says government report
LSD: Speaking to volunteer users of the drug as trials get underway to see if it cures depression and addiction

High hopes for LSD

Meet the volunteer users helping to see if it cures depression and addiction
German soldier who died fighting for UK in Battle of Waterloo should be removed from museum display and given dignified funeral, say historians

Saving Private Brandt

A Belgian museum's display of the skeleton of a soldier killed at Waterloo prompts calls for him to be given a dignified funeral