The chancellor's fifth budget was full of trickery—yet utterly serious
“NOW this is not the end. It is not even the beginning of the end. But it is, perhaps, the end of the beginning.” Churchill's genius for spin, after El Alamein had delivered the first big British victory of the second world war, is illustrated by how little-remembered are the modest claims he went on to make for that triumph. “Henceforth,” he continued, “Hitler's Nazis will meet equally well-armed, and perhaps better-armed, troops.” That was a weaselly fudge if ever Bagehot heard one.
George Osborne faced a similarly daunting exercise in expectations management when delivering his fifth budget on March 19th. Wan with nerves, the chancellor of the exchequer was able to announce to Parliament the best economic figures in five years of faltering growth, falling living standards and painful spending cuts. The economy is growing faster than in any other large rich country. It is creating record numbers of jobs: for the first time in three decades Britain's employment rate is higher than America's. The budget deficit is edging downwards. The difficulty for the chancellor was that, having been for so long denied, people want jam, which he was bound to refuse them. The deficit, at around ￡108 billion ($179 billion) this year, or 6.6% of GDP, is too large to support the tax cuts that many of his Conservative colleagues are demanding. But, while bound to disappoint, Mr Osborne needed to avoid seeming so cautious as to crush confidence in the recovery and his own stewardship of it. His task was to celebrate and reassure, yet give away almost nothing.
He managed that, first by reminding Britons of the state they were in when the Tory-led coalition took over in 2010. The economy had suffered the deepest recession of modern times and seen the world's biggest bank bail-out. The government was borrowing a quarter of what it spent. That history lesson done with, Mr Osborne began to relax, and a dab of colour returned to his pallid cheeks. Britain was recovering from these horrors, he said, because of its adherence to “the plan”.
He referred to a raft of spending cuts, tax increases and pro-business gestures designed with a view to restoring the public finances to surplus by 2018. That target is, in fact, less fixed than Mr Osborne implies. It was pushed back several times while the economy languished: the deficit was originally to have been closed before next year's general election. The plan is, in short, little more than an expression of the chancellor's own shifting economic judgment.
No matter. The recovery, and his political rivals' failure to predict it, has enshrined the plan as sacred and inflexible. This is a mark of the political capital Mr Osborne is now drawing on, even as he admitted the economy's many remaining weaknesses. His Labour Party rival, the shadow chancellor Ed Balls, who chuntered grudgingly throughout the budget speech, appears to have been outdone. So have Mr Osborne's many erstwhile Tory critics. The apparently daunting task of arguing that the economy is stronger yet still too weak for giveaways turned out to be a cinch. The chancellor was triumphant.
That patently owes as much to crafty politics as to economics, and Mr Osborne showed plenty more in his speech. It was less weaselly than stoat-like—a whirligig of policies and pledges that appeared more fascinating than substantial. They included several previously flagged traps for Labour. Legislation to cap the welfare bill—a popular idea, tricky for Labour, and of only token importance to the cost of welfare—is to be introduced to Parliament next week. Announcing some money for next year's 800th anniversary of the Magna Carta, the chancellor even found the opportunity to invite comparison between the medieval monarch it humbled, King John, and another brother-betrayer, Labour's leader Ed Miliband. It was one of the better budget gags.
The chancellor's more substantial offers appeared similarly designed to outfox his rivals. By raising the income tax threshold to ￡10,500, Mr Osborne will hope to woo aspirational low earners, a group that currently votes, if at all, for anyone except the Tories. By giving retirees more say over their pension pots, a more ambitious ploy, he must hope to stanch the seepage of silver-haired Tory voters to the UK Independence Party, which has no economic policy to speak of. To give the chancellor his due, pulling out a surprise liberal reform of this kind seemed also a sensible way to negate the unrealistic demands for a splurge.
The method in his trickery
And there is an important truth in that. Though Mr Osborne's trickery is always evident, so, increasingly, is the seriousness of his purpose. For all his feints, traps and compromises, the chancellor has so far stripped the public sector of 600,000 jobs, capped welfare and overseen, in a downturn, historic growth in private-sector employment. He has cut business taxes, thereby persuading employers to accept a rise in the minimum wage.
It is reasonable to argue about whether Mr Osborne's measures have been just. Next year's election campaign will accordingly pit the Tory claim to have managed the economy well against Labour's aspiration to manage it more fairly. But no one should doubt the clarity of the vision that is driving the Conservative chancellor. Whereas David Cameron, the prime minister, promised to change Britain, with a fuzzy idea of volunteerism, Mr Osborne is actually changing it.
His ambition is to make a more industrious society, less blighted by the entitlement culture that blossomed under Labour. Even after the deficit is no more, the chancellor believes, public spending should be held down. Again, his motives appear partly self-interested. Mr Osborne harbours leadership ambitions, and his ideas are finding more favour with the right of his party than Mr Cameron enjoys. The beneficiaries of his remodelled society might also be likelier to vote Tory. But just because the chancellor's vision is political does not necessarily make it wrong.