George Osborne usually tells his aides to prepare for each Budget as if it were his last. This time round, the Chancellor and those around him needed no reminding of what is at stake. They knew that this statement had to boost the Tory election campaign and define the choice facing voters in May, otherwise it really will be the last Budget he gives. As one Tory MP put it, ‘The Budget’s got to deliver some political momentum or we’re done for.’
Osborne has long been aware of the importance of this Budget for his career. If David Cameron returns to No. 10 after the election, Osborne will take the applause. His stock will rise in the party; recollections of his disastrous 2012 Budget will be put aside. He will be hailed as the pilot who weathered the storm. But if Ed Miliband ends up as Prime Minister, Osborne will be damned along with Cameron. At 43, he will — in political terms — be finished.
It was for political reasons that Osborne adjusted his future spending plans to defuse the Labour charge that he wants to take public spending, as a percentage of the economy, back to 1930s levels. By tweaking his spending plans like this, Osborne has also reduced one of the major obstacles to another post-election deal with the Liberal Democrats.
Osborne, who understands coalition politics better than anyone, knew the Liberal Democrats didn’t want to be seen to be working hand in glove with the Tories so close to an election. So he made a series of offers that were too good to refuse: clear ‘wins’ on mental health funding, income tax and pension reform. They have even been presented with their own mini-Budget statement. Danny Alexander, the Chief Secretary to the Treasury, will deliver it the day after the Budget and set out the Liberal Democrats’ fiscal plans to the Commons.
In exchange, the Liberal Democrats had to agree to various Tory plans. The threshold for the higher rate was raised above inflation, fuel duty was frozen again and Osborne announced a Help to Buy Isa which will see the government effectively top up the savings of first-time buyers by 25 per cent.
Osborne has what one long-time ally calls the ‘political nous of seeing what helps your opponent’. His understanding of how to make a smart trade is increasingly valuable as politics becomes more fragmented. His ability to make deals with politicians from other parties has been crucial to the success of his plan for a ‘northern powerhouse’ based around Manchester. It might well be crucial in the likely event of another hung parliament. Indeed, those who have spoken to Osborne recently say that he is trying to work out how to pull off another coalition deal and how to persuade Tory MPs to accept it.
In many ways, the most remarkable thing about this Budget was how little Osborne’s failure to eliminate the deficit featured in the build-up to it. Labour’s lack of fiscal credibility has left it in no position to attack him for having missed this target. Osborne also has some impressive achievements to boast about, notably the recent steady growth in the UK economy — it was the fastest-growing economy in the G7 in 2014 — and the rise in private sector employment that our editor writes about on page 14. This shift of workers from the public to the private sector — there are 900,000 fewer in the public sector and 2.5 million more in the private sector than in 2010 — should help Osborne in his mission to foster a society that is more receptive to centre-right ideas. Another aim advanced in the Budget is the ‘northern powerhouse’, the putative super-conurbation that Osborne reckons could act as the second great engine of the UK economy. Politically, it could also act as a route back into the urban north for the Tories. As an idea, it is the closest they have to inspiration in their election campaign so far. One secretary of the state said to me this week that the Tories haven’t a national message to match the ‘northern powerhouse’ for -optimism.
Pensioners, because they vote in such in large numbers, are never far from politicians’ thoughts as polling day approaches. Sure enough, the Budget contained good news for them. Osborne has followed up his ending of the requirement to buy an annuity by allowing pensioners to trade their existing ones for cash. (In a sign of the struggle that the Liberal Democrats face to gain credit for their influence in government, little was made of how long their pensions minister Steve Webb has pushed for this change.) Privately, Tory MPs hope that this offer will help them woo back those older voters who have gone over to Ukip.
The cut in beer duty was very Osborne, too. He was delighted by the good publicity he received when he first cut it in 2013, musing that he’d never received so many good Budget headlines for something that cost so little. But it will be Osborne’s colleagues who will be taking advantage of this drop in the price of a pint if the Budget doesn’t bolster the Tories’ ratings. The party’s mood is now largely dictated by the opinion polls and there is mounting concern that they are — in the words of one Cabinet minister — ‘stuck’. The longer this continues, the louder the murmurings will be from members of the Cabinet about the lack of inspiration in the Tory campaign.
The paradox of this performance is that it was a typically coalition Budget which the Tories hope will provide a springboard to election victory. But the fact that this coalition could produce so substantive a Budget so close to polling day is the clearest -indication we have had that the Liberal -Democrats and the Tories could do it all over again. After five years of being in it together, the two leaderships can still work together.