George Osborne has developed a reputation for pulling rabbits out of hats at Budget time, but what a rabbit and what a hat.
The Budget itself was bold enough – the first purely Conservative Budget for 19 years took an axe to welfare as well as to taxes on income – but the truly revolutionary aspect was a Conservative Chancellor creating a new, higher minimum wage for the first time in history.
It is, however, simplistic to view this as a purely Conservative Budget: the many Labour-like policies – clampdowns on non-doms, 30 hours childcare and higher taxes on dividends, for example – mark it as a decisive break from Thatcherism. Rather it should be viewed as the first Budget of a new ‘blue collar conservatism’, the political strategy that seeks to place the Conservative Party smack bang in the centre-ground of British politics, appealing to workers everywhere.
No Budget is without losers, especially when the deficit is still running at £65 billion a year, and once again the young took a hit. They have lost the right to claim housing benefit and student grants, and do not qualify for the new National Living Wage, while pensioners and those whose parents own homes are the beneficiaries. Equally, claimants of tax credits – especially those with three or more children – will incur losses, despite the rising basic wage, as will public sector workers whose earnings are being restrained for four more years.
But, as ever with George Osborne, all these financial decisions come from a deeply political calculus. Since his unexpected victory at the last election, the Prime Minister and his closest ally have been ruthlessly focused on what it will take to win the next election. The Labour Party is in a poor state, as its response to the Budget showed, and they sense the opportunity for another, bigger election victory in 2020.
So, in reaching out to groups whose votes they need next time around – such as older people and working families – with cuts in income tax and inheritance tax, the Chancellor is prepared to risk losing support from groups whose votes the Conservatives have always found hard to harvest. He believes that by positioning the Tories as the workers’ party he will ease the path to the next election victory. And, from a personal perspective, Osborne also knows that if he is to lead the Conservative Party to that victory, he needs to redefine himself as the workers’ friend, rather than as yet another public schoolboy taking over the reins.
I remember sitting in my office in No.10 watching the last Emergency Budget George Osborne gave and thinking: “if he can pull those plans off then the next election is sewn up”. He didn’t, of course, and the plans to have a Budget giveaway in March 2015 were badly derailed, but through a mixture of luck and judgement he now has a second chance. On yesterday’s evidence it is one he is determined not to waste.
Measurement and evaluation