It is neither an original nor a controversial observation that families trapped in poverty might be blameless for their misfortune. Likewise, it is not Bolshevism to observe that extremes of inequality – whether measured by income or opportunity – have a corrosive effect on society. Clearly not, because those points were made on Tuesday in a thoughtful speech by Sir John Major, the former Conservative prime minister.
That Sir John’s intervention made headlines testifies to a narrowing in recent years of Conservative discourse. It speaks to the party’s capture by a dogmatic view of the national economic interest predicated almost exclusively on the pursuit of budget discipline, whose social cost may be regretted but not cited as reason to change course.
This view is underpinned by a deeper sense of historical purpose, harking back to Margaret Thatcher’s governments. This is the view that Tories are required by political destiny to enforce tough reforms, ferociously opposed yet later vindicated as necessary preparation for future prosperity. George Osborne sees criticism of his budgets almost as a re-enactment of reaction against Geoffrey Howe’s 1980s budgets – despised by Labour, denounced by economists and provoking queasiness among Tory “wets”, but ultimately redefining political consensus.
The common caricature of Mr Osborne as a crude neo-Thatcherite is unfair. In reality, he has a nuanced view of the role of the state, embodied in his pet “northern powerhouse” project, his business levy to fund apprenticeships and his support for investment in infrastructure. But those ambitions are overshadowed by the implications of his fiscal policy. He himself may imagine his project as a healthy rebalancing from state subsidy of incomes (cutting benefits) to state sponsorship of wealth creation (a new industrial strategy). But as Gordon Brown argued on Wednesday, his record will be defined by the scale and pace of cuts, and the suffering they inflict.
Sir John’s warning over inequality is not the first in-house Tory sign that Mr Osborne has over-reached. Tory MPs and newspapers normally quick to defend the chancellor have complained that cuts to tax credits punish hard work and aspiration – emblematic virtues in the Conservative creed. The House of Lords has forced Mr Osborne to revisit the policy. A similar backlash looks inevitable when the next round of cuts hits local government budgets, forcing the closure of services and, most cruelly, a crisis in social care funding. The immiseration of vulnerable elderly people will be politically, not to mention morally, intolerable.
Mr Osborne has more room for manoeuvre than appears to be the case. The budget straitjacket he wears was donned as a matter of political choice, not economic necessity. He aims for a surplus of £10bn by the end of the parliament – a figure already downgraded from £23bn envisaged in his 2014 autumn statement. His credentials as a fiscal disciplinarian are not doubted by friend, foe or bond market. For most analysts, productivity, skills and wages are the weaknesses in Britain’s economy in greatest need of attention.
Further helping the chancellor is an opposition leadership with little interest in restoring Labour’s credentials as a party sensitive to public concerns about its attitude to borrowing and spending. Mr Osborne could steer a softer path towards balanced books confident that John McDonnell, the shadow chancellor, would gain little from the climbdown. Mr McDonnell is notionally committed to reducing the deficit. But in the polarised climate of British politics today, much of the left does not recognise the existence of “moderate austerity”, which leaves that option wide open to Mr Osborne. He has abandoned budget targets once already, in 2012, with relative impunity.
Mr Osborne has no choice but to soften the blow of tax credit cuts when he delivers his spending review later this month. He is shrewd enough to devise some mechanism that appears to compensate the worst affected, while burying in small print the bad news for whoever picks up the bill. He will have to resort to craft of that nature if the whole package is to remain true to the established fiscal framework. But the chancellor’s surplus target should be more negotiable than that. His reputation as an advocate of austerity is invulnerable. For the sake of political expediency, he can afford to amend the plan in the name of compassion. And tens of thousands of people in Britain cannot afford to pay for the plan as it stands.
