The lucky Chancellor

Was there ever a Chancellor as lucky as George Osborne? Possibly one: Gordon Brown, who inherited from Kenneth Clarke an economy ticking along very nicely, thank you. But Osborne’s luck has been very different from Brown’s. He has benefited from a curiously muffled opposition, a lack of scrutiny, economically illiterate cheerleaders, a benevolent economic cycle and the happiest of economic shocks.

Let’s look at Osborne’s record. As Shadow Chancellor, he argued that Brown and Darling’s oversight of the banks was too heavy-handed and that more deregulation was needed. He visibly panicked during the 2008 crisis and it’s on the record that the business community was worried about his appointment to the real job in 2010.

On arrival at the Treasury, Osborne found an economy that was fragile, but growing. He pursued policies such as raising VAT, which sucked demand out of the economy and reversed Darling’s growth. It was only when he began to take a more Keynesian approach (while denying it) and the Eurozone began to recover that momentum behind a recovery began to build.

Lucky lucky lucky
Lucky lucky lucky

The Labour reaction to all this has been curious. Ed Balls’ famous ‘flatlining’ gesture was always going to become redundant once the economic cycle moved on, as it inevitably would. Did Balls think that recovery would never come, that Osborne had abolished bust and boom? Surely not. But Labour allowed the Conservatives to paint a picture of appalling Labour economic mismanagement. Balls let himself be trapped into a position whereby he would neither apologise for his record in office nor really defend it. Perhaps Gordon Brown had painted Labour into that corner when he continued to use the out of date ‘Labour investment versus Tory cuts’ trope in the run up to the 2010 election; perhaps to take another path would have ceded too much credit to Alistair Darling for Brown’s liking?

But in my view there was too little from Labour on the lines of: ‘We steered the economy through its most difficult times. Our economy is growing again because of decisions we took and that’s the only way the country will get through this. Yes there is a deficit but without it millions more would have been unemployed and the economy would have shrunk further. Now the challenge is to get the deficit down while not putting the recovery at risk. The international weather is still stormy so we will do it carefully and in the best interests of the country as a whole.’

Of course, it’s difficult to know whether such a defence would have been effective. On the other hand, the ‘flatlining’ strategy has allowed Conservative sympathisers to greet the inevitable upswing as ‘proof’ that the Tories had ‘won the economic argument’. Labour have been reluctant to greet economic recovery as ‘too little too late’ and have presented the cost of living crisis (which while true can be rectified by events outside the government’s control) rather than attacking the coherence of Osborne and Crosby’s supposed ‘long term economic plan’.

Even the delicacy of the recovery has worked to Osborne’s benefit. Millions of house-buyers and other borrowers have benefited from rock-bottom interest rates. If the recovery were really as robust as Osborne’s cheerleaders suggested interest rates would have risen about a year ago. The resulting pain, while proof of emergence from recession (and counter-balanced by relief for savers), may well have found Mr Osborne’s new-found popularity melt away as quickly as a tax on pasties.

Finally, the collapse of the oil price has led to extra money in the pockets of consumers just before the polls (even though petrol prices remain higher than when David Cameron was able to use the odd phrase ‘a pound and seven at the pump’ at PMQs). The £10 saving each time you fill up reduces the pressure on George Osborne to find budget pre-election give-aways in this Wednesday’s Budget. When was the last time a Chancellor experienced an economic shock that worked in his favour?

But then George Osborne is a lucky Chancellor.


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