It is a tradition of Budgets that they should contain an element of surprise. George Osborne’s latest, delivered on Wednesday, did not disappoint.
Even in this era of pre-Budget briefing he managed to keep his bombshell under wraps. He left till the end of his speech the radical news that he was, in effect, abandoning the minimum wage and replacing it with a much more generous national living wage. He outdid Labour in its own terms. But his Budget implies a great deal more than adopting a striking new approach to low pay. He wants to pitch the Conservative Party as the natural party of the centre ground in British politics. Is this convincing?
Tony Blair used to rue the fact that he had chosen to study law at Oxford. Had he read history instead, he mused, he would have been better prepared for the job of running the country for ten years. George Osborne did not make that mistake. And it seems that his knowledge of history, and especially the history of the Conservative Party, is informing the way he acts as chancellor. It may well take him into the top job too.
The figure in Conservative history Mr Osborne is being compared to is the nineteenth-century prime minister, Benjamin Disraeli. Disraeli is remembered most as the patron saint of ‘One Nation Conservatism’, a philosophy that sought to apply conservative principles to bind the nation together rather than divide it. Mr Osborne professes to sign up to that. But it is another aspect of Disraeli’s career that is drawing the current comparisons.
Disraeli was a political genius of pragmatic cunning, never happier than when deftly changing course to wrong-foot his opponents and, by doing so, securing his party’s grip on power. In a famous phrase he ‘dished the Whigs’ by stealing their policies.
That, it could be said, is what George Osborne did this week, and not only by embracing the idea of a national living wage as his party’s own. Many commentators forecast that Mr Osborne, unexpectedly freed from the shackles of coalition government, would deliver an uncompromisingly right-wing Budget now that he had the chance. And it is true that his Budget contained some radical right-wing measures, red in tooth and claw but not in political complexion. But what is most notable is how he also moderated right-wing positions he had recently espoused and even adopted left-wing policies Labour was too timid to advocate.
The Tories went into the election as the party of tax cuts, promising to get rid of the deficit in the government’s accounts, restoring it to surplus by 2018 and to impose savage cuts in the spending of unprotected departments such as defence, the home office and transport in the process. Their opponents said this was unnecessary in principle and would destroy the public services.
Mr Osborne has blithely changed his mind. He’s given himself an extra year to get rid of the deficit, announced tax increases that the independent Office for Budget Responsibility reckons to amount to a whopping extra £47bn over the lifetime of this parliament, and blunted the axe he was due to wield over departmental budgets. The OBR says that public spending will now be £83bn more over the next five years than the Chancellor was proposing in his pre-election Budget in March. This enabled him, for example, to say that Britain would honour its NATO pledge to maintain defence spending at 2% of national income over the whole period.
But Mr Osborne also adopted policies that a dispassionate Martian would regard as left-wing. He’s going to reduce the pension tax advantages enjoyed by the rich. He’s going to curb mortgage interest tax relief that higher-tax payers enjoy when they invest in buy-to-let properties. He’s going to restrict the rights of ‘non-doms’. And he’s imposing a substantial levy on big companies to pay for a new apprenticeship scheme.
But it’s the adoption of a national living wage that shows him most adept at stealing his opponents’ clothes. Labour went into the election promising a minimum wage of £8 an hour by 2020. Mr Osborne’s plan promises a compulsory £9 an hour living wage by 2020 for over-25s, starting at £7.20 in April next year.
This radical change is part of a wider policy to deal with what the Prime Minister recently called ‘the crucial issue of low pay’. As a quid pro quo, Mr Osborne is making the £12bn cuts in welfare spending that he promised largely through freezing the in-work tax credits currently available to working families to top up their low pay. The basic idea is that companies should be forced to pay a decent wage so that the state won’t have to subsidise low pay. The Chancellor plans to cut the corporation tax that companies pay to 18% so that they will have the money to pay the extra wages.
That, at least, is the plan. But it may not work. Undoubtedly many people, possibly running into the hundreds of thousands, will end up much worse off because their pay is already above the proposed living wage level so all they will see is the cut in their tax credits. The OBR also estimates that higher wages could well cost 60,000 jobs, though Mr Osborne believes this will be more than offset by the extra million jobs he believes will be created over the next few years. His critics say this is hardly ‘one nation’ stuff.
Mr Osborne calls it a ‘new settlement’, a phrase with a vague Disraelian tone. Certainly many Labour MPs realise they have had some of their clothes nicked. As one put it, using a different metaphor, Mr Osborne ‘has put his tanks all over our lawn’. In doing so, the Chancellor clearly hopes that the public will come to see the Tory Party no longer as simply the hairshirt party that knows only how to cut, but as the party that can claim to that quintessentially British notion, of ‘fairness’. He has seen how the public’s enthusiasm for a cap on welfare payments may enable his party to get away with its cuts in tax credits as ‘fair’ now that it is allied to a new living wage.
In taking this gamble Mr Osborne, like Disraeli, is hoping to secure his party’s dominance of British politics for a generation and no doubt propel him into No 10 when David Cameron packs it in at the end of this parliament.
Are these realistic hopes? Is George Osborne the new Benjamin Disraeli?
