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The Budget’s Missed Opportunity

Last Updated: Friday, April 1st, 2011

Last week’s Budget may have contained welcome moves on corporation tax and some short-term sweeteners for the economic pain but, overall, I worry that George Osborne missed the opportunity to give the nation a fireside chat.

I fear we are in for economic hell for two or three years as cuts bite, inflation accelerates and mortgages rates trend upwards. The Government has repeatedly talked of a “hard road ahead” but I would prefer the Chancellor to have been a little more direct. It’s like a doctor about to perform surgery. If the patient knows their bad leg will still be hurting in three months but they’ll be walking again comfortably in six, the pain in three months won’t cause anxiety. The government’s failure to carefully describe the path ahead raises the danger that as the water gets very choppy and some boats sink, Ed Balls will be telling the country that the medicine hasn’t worked and some voters will believe him.

Osborne feels that there’s been enough doom and gloom and wonders if quite modest cuts [0.6% in 2011-12, 1.1% in 2012-13, 1.3% in 2013-14 and 0.8% in 2014-15 – http://j.mp/gox8KG] are being interpreted as much more savage than they are. Privately he says that voters have had enough “cod liver oil”. They may feel they’ve had enough cod liver oil but that doesn’t mean they aren’t going to get a lot more. There may have been too much blood-curdling rhetoric about cuts – although I don’t think voters are prepared for their extended nature – but the pressures on household budgets from inflation and rising interest rates are going to be much more impactful over the next eighteen months.

Successful political projects need Reaganite optimism but there’s little to be optimistic about in the short-term. The Coalition needs to keep raising the public’s vision towards the economy after the Eurozone, banking sector and housing markets have normalised. The Government’s German model as I’ve called it – emphasising work, apprenticeships, skilled education, manufacturing, regional growth – give some hope that the country will get back on its feet by 2013 to 15.

 

THE BUDGET BOUNCE HAS UNWOUND

Last week’s Budget gave the Coalition a boost in the opinion polls but nine days on we are pretty much back where we were before George Osborne got to his feet. Labour are comfortably above 40% and the Conservatives are in the mid to high thirties. The one thing that does seem to have changed a little in the government’s favour is public attitudes to cuts. Surveys are somewhat contradictory depending upon the different way different pollsters frame the questions, but a slightly larger majority of the public seem to accept the need for cuts and give Cameron/Osborne a lead on economic management despite the Tories’ overall disadvantage in headline poll numbers.

For those interested in following the opinion polls on a regular basis I strongly recommend Anthony Wells’ UK Polling Report blog, http://ukpollingreport.co.uk/. His latest blog on the underlying weakness of Labour’s position is a must read (http://ukpollingreport.co.uk/blog/archives/3389).

 

LIBERAL DEMOCRAT ASSERTIVENESS

If the Tories are set for bad results in May this week’s YouGov survey in conjunction with The Sun underlined that the Liberal Democrats may face a bloodbath. The fears of this may explain the increasing private and public assertiveness of the yellow half of the Coalition (http://bit.ly/e2EOA7).   On property taxes, nuclear energy, university financing and AV, Clegg, Cable and Huhne have been making very independent noises – dog whistling to their own supporters that they are fighting for Liberal Democrat values within the Coalition. Tory insiders are relaxed about all of this – seeing it as pre-election posturing and say that relations between ministers are as good today as they were nine months ago. One specific worry, however, is the AV referendum. Lib Dems fear that the ‘No’ campaign will put Nick Clegg on the referendum ballot paper – capitalising on the Deputy PM’s unpopularity with warnings that he will become the kingmaker in British politics if AV passes. Lib Dems don’t want this tactic used. It will hurt them in other electoral tests and will be seen as a betrayal of coalition etiquette. This week’s extraordinary warning from Huhne to Warsi not to use Goebbels-style rhetoric was a message to the Tories that if they play the Clegg card there could be war.

War might involve the Yes campaign putting Cameron on the ballot paper. Up until now the Yes campaign has been fairly quiet – relying, dubiously, on celebrity endorsements from the likes of Colin Firth and Stephen Fry in their national mailout. Tory HQ fears that an 11th hour Yes campaign tactic will say that a vote for AV will end the possibility of the Tories ever winning a majority again. This tactic will be used to energise Labour and Lib Dem voters in what is expected to be a low turnout contest.

 

EUROPE AGAIN

The issue of Europe looks set to feature prominently again in Tory politics because of the debate about a bailout for Portugal. On ConservativeHome today (http://j.mp/i7Cp9f) the leader of the Tory MEPs, Martin Callanan, has said that there should be no bailout. “Portugal,” he wrote, “was an anomaly of the last decade: its economy stagnated while others grew, it undertook none of the fundamental competitiveness reforms being urged upon it, ironically, by the EU’s Lisbon Strategy, and did not tackle key issues like its high corporation tax.“ Callanan concludes: “What Portugal needs now is a long term strategy to make it competitive, not a short term sticking plaster.”

ConservativeHome’s own survey of Tory members – to be released next week – finds four out of five members opposed to UK involvement in a bailout. The domestic banking bailouts may turn out to be profitable – and will be endangered if Portugal defaults – but as Angela Merkel has discovered, voters can be very angry when, in hard times, their money is used to pay for the irresponsibility of other nations.

 

SPLITS AGAIN?

Jonathan Isaby for ConservativeHome and Professor Philip Cowley’s excellent Revolts.co.uk have documented the unprecedented rebelliousness of this parliament. Tory MPs have, for example, rebelled 15 times on Europe (involving 60 MPs in total). On the Lib Dem side only backbenchers David Laws and Tom Brake haven’t voted against the Coalition at least once.

The Tory rebelliousness has obviously annoyed the party leadership but there are also signs that it has annoyed many new MPs too. At this week’s meeting of the 1922 Committee of backbenchers the serial rebel Peter Bone was jeered by new MPs when he was making points. One MP told me that they had “never before seen such rudeness and discourtesy at a 22”. The new Group of Forty MPs in marginal seats (http://j.mp/ibO2W7) – which Cameron is giving a lot of time to – and 10 Downing Street’s establishment of a weekly meeting for the 38 PPSs are two mechanisms via which the Tory leadership is building new communication routes within the parliamentary party, that do not rely on the 1922.

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