UK Politics

Budget 2013: Osborne's predicament

George Osborne

Wednesday's Budget is a chance for Chancellor George Osborne to recover credibility after last year's "omnishambles". Will he manage it?

The front page of this week's Economist magazine features the Chancellor of the Exchequer at the wheel of a patriotically painted Mini.

Union flag paintwork adorns the side panels, the driver's door and the roof. But the car's going nowhere. The wheels have fallen off, and it is up on bricks.

It is a striking visual image of the predicament George Osborne finds himself in.

After all, it's pretty tricky steering something in the right direction, if it is not moving and events haven't been kind.

From the arrival of a double dip recession, to the departure of a triple A credit rating, the economic numbers and accompanying headlines have been tough.

"I think he has always been very realistic about the situation. He thinks he is a Chancellor of the Exchequer when there is low growth and so naturally he be in political difficulties," Daniel Finkelstein of The Times told Radio 4's The World Tonight.

"That is what happens when the economic situation is difficult and he always expected that would come. He really enjoys doing the job, it is a feature of his personality that he has gusto for what he does and enjoys what he does despite all of the difficulties."

'Complete disaster'

Mr Finkelstein has known George Osborne since the early nineties, when the now Chancellor was a Conservative Party backroom boy.

The unravelling of last year's Budget, with all the talk of the pasty tax and the granny tax, the caravan tax and the church steeple tax has chipped away at the Chancellor's credibility both within his party and beyond it.

The word 'omnishambles' was thrown around with such vigour by his opponents afterwards that it was named the Word of 2012 by the Oxford English Dictionary.

Mr Osborne's fiercest critics are inclined to say "I told you so".

Image caption This is the slowest recovery since the 19th Century

"It has been a complete disaster. Every claim they made about growth and what would happen to the economy has failed," says the economist, David Blanchflower..

"At the time when he came into office the projection was that the economy would have grown by around 7% and now the numbers are 5% or less than that,"

Professor Blanchflower is a former member of the Monetary Policy Committee of the Bank of England, which sets interest rates and is now economics editor of the left-leaning New Statesman magazine.

He has been a long standing and blunt critic of Mr Osborne's financial strategy.

"On every one of the predictions about growth, they have failed. The saddest indictment of all, this is the worst recovery since the 19th century."

But Downing Street and the Treasury point tentatively to signs of progress.


Exports are starting to turn around, they say, employment in the private sector is rising across the country, there is no alternative to deficit reduction. So what do Tory backbenchers hope for in the Chancellor's Red Box?

Image caption The pasty tax dented the government's credibility

"Oddly enough I would like to see nothing new. I would actually like this to be an incredibly boring budget!," Claire Perry, Conservative MP for Devizes in Wiltshire, told me.

"I think the framework is there, it is a framework that by and large the private sector thinks is appropriate, we can see the jobs coming through. Let's just be confident to say, that's the plan, we are sticking with it."

Labour, meanwhile, will hope to use the Budget as their latest tool to convince people they can be trusted on the economy again.

Senior figures know the key battleground at the next election will be economic credibility and the party seen by most to have the most of it will win the most seats.

Ed Balls, the Shadow Chancellor, has admitted to the Telegraph that 'we have a real issue about winning trust and credibility. People have got to think they can trust Labour with public spending and their money.'

Expect Mr Balls to reiterate that there should be a temporary cut in VAT and a reintroduction of the 10p income tax band, a policy ditched by Gordon Brown.

The Liberal Democrats have a more subtle manoeuvre to perform on Budget day.

As the junior partner in the coalition, they will want to shout loudly about ideas they want to claim as their own, such as raising the threshold at which people start paying income tax.

Sense of humour

Lib Dem MPs outside the government will also want to gently point to plans they wouldn't have wanted if they had been in government on their own.

The Budget will be another dry run for their general election message of prioritising "a stronger economy in a fairer society".

To translate that slogan into English, they claim they are economically more credible than Labour, and instinctively fairer minded than the Conservatives.

But, ultimately, Budget day is all about the Chancellor: Raising as much short term cheer for his party as possible and setting, or maintaining, some long term direction.

Daniel Finklestein from the Times says George Osborne will have a clear eye on strategy.

"My view is the Conservatives want to run a general election campaign, 'Britain is on the right track, don't turn back.' They have to be in a position to run that in 2014 and 2015. Everything he does in this Budget has to be strategically designed to allow him to run that campaign."

"The one thing I always point out about the famous chancellors pulling rabbits out of hats thing is magicians don't pull rabbits out of hats they haven't put in the hat in the first place because it is a magic trick. You can't do that in a Budget.

"All you can do is produce out of one hand what you have taken with the other hand and people know that," he added.

Those who know George Osborne point to his resilience and capacity for hard work, but an acknowledgement of the political and economic prognosis: An anti politics mood lingers, the economy appears anaemic.

But those who know him, such as the Conservative backbencher Claire Perry, say he can laugh at himself and has even found fun in last year's row about the pasty tax.

"The Chancellor after the biggest recession we've ever seen isn't going to be winning popularity contests. But he also has a great sense of humour.

"There is a knitted Cornish pasty on one of the desks that one of his staff sits at.

"There is a realisation that you have to take the long view here, and I think he does."