On Wednesday, George Osborne will stand up to deliver the first purely Tory Budget in more than 18 years
On Wednesday, George Osborne will stand up to deliver the first purely Tory Budget in more than 18 years.
It will be blue, with no yellow round the edges. He has told friends that you can only justify doing two Budgets in a year if you do big things.
So, he’ll announce significant cuts to the welfare budget and a new effort to improve the British economy’s productivity.
Osborne views the start of the parliament, with Labour in a fraught leadership contest, as the moment to seize the political initiative.
One of those involved in preparing the Budget tells me: ‘There’ll never be an easier time to do difficult things.’ And he is preparing Tory MPs for the backlash to his decisions. Ten days ago he held a lunch in Number 11 for 70 MPs in marginal seats.
He urged them to stick with him when it gets rough, pointing out that taking child benefit away from higher earners was hugely controversial in 2010 but accepted by the time of the Election.
‘Everyone’s ready for a tough Budget,’ says one of those tasked with keeping the leadership and Tory MPs on the same page. ‘We’ve got to do it and better now than in 2018 or 2019’.
There’s another reason Osborne thinks now is the moment to act: Greece. He is writing his Budget speech this weekend and I understand he will point to Greece and warn this is what happens to a country that won’t confront its fiscal problems.
One ministerial supporter says: ‘Our argument is we do this because it is necessary, not because we want to. Greece demonstrates that.’
The Treasury admits events in Athens could ‘overshadow the Budget’. If the Greeks vote No, David Cameron expects to head to Brussels for an emergency EU Council on Tuesday to discuss the EU’s response. In these circumstances, the Budget will seem small beer compared to Greece’s possible expulsion from the euro.
‘Europe’s run out of patience with Greece,’ a Downing Street source warns. ‘Have we reached the point where people think it better that they leave than stay?’
But senior UK government figures expect a Yes vote in Greece, a defeat for the Syriza-led government. One says: ‘Merkel has Tsipras where she wants him, caught out by a referendum that he’s called and that he’ll probably lose.’
A Yes vote, though, won’t solve Greece’s problems or lead to a quick deal with its creditors. ‘There’ll be months of chaos, whatever the outcome,’ cautions a UK Government source who is monitoring the situation closely.
George Osborne will use Greece to warn Britain must get its own house in order. But he will also make a moral argument for his welfare reforms.
He will argue that the Gordon Brown-devised tax credits system has ended up subsidising low pay, as companies kept wages down knowing that the State would top them up.
George Osborne will use Greece to warn Britain must get its own house in order. But he will also make a moral argument for his welfare reforms
In No 10, they give two reasons why tax credits can be cut without hurting the low paid. They say wages are rising with the recovery and will do so quicker if tax credits are reduced. And they say they want a low-welfare, low-tax economy. So, the tax threshold will be linked to the minimum wage.
They also point to their commitment to raise the tax-free allowance to £12,500 by 2020, and there are signs this weekend that they might reach that even sooner.
Gordon Brown was Chancellor for ten years, moving Britain’s political economy, and the centre of gravity of our politics, left.
Osborne sees his job as reversing this, telling colleagues: ‘What matters is what you’ve done, what you’ve changed.’ After this Budget, he’ll be that much closer to overturning Brown’s legacy.
Surprises all the way in Labour’s wacky race
Stella Creasy (pictured) wants Labour to embrace grassroots campaigning
The Labour leadership race could be turned on its head today. Unite the Union, Labour’s largest financial backer, is considering endorsing veteran Left-winger Jeremy Corbyn. It had been thought it would back frontrunner Andy Burnham. But those in Burnham’s camp admit they would ‘not be surprised’ if Unite backs Corbyn.
It raises the serious possibility he won’t, as MPs assumed, be out in the first round.
An insider tells me Burnham’s refusal to take union money for his campaign infuriated Unite. The Tories would love Corbyn as Labour leader. It won’t happen but, if he beats Blairite Liz Kendall, as some canvassing indicates, it shows more people in Labour want the loony Left than Blair’s election-winning. If Corbyn wasn’t enough to keep the Tories happy, there’s Tom Watson. Watson, former flatmate of Unite boss Len McCluskey, is frontrunner for the deputy leadership. A divisive figure as an instigator of the coup against Blair, he embodies a machine politics many wish to see gone.
The candidate with the best chance of beating him is Stella Creasy (right), who wants Labour to embrace grassroots campaigning. She ran a highly effective campaign against payday lenders, which a Tory Minister grudgingly called ‘perfect opposition politics’.
But Labour seems intent on doing what their opponents want. A party that takes Corbyn and Watson seriously won’t win a General Election.
The most dramatic Tory row of the Coalition years was the clash between Michael Gove and Theresa May over extremism policy. It ended with a May special adviser resigning and Gove writing a formal letter of apology to a Home Office civil servant.
But with the Government focusing on this issue again, relations are much better. A source close to the Home Secretary says she and Gove, now Justice Secretary, ‘see eye to eye on criminal justice policy’.
The most dramatic Tory row of the Coalition years was the clash between Michael Gove and Theresa May over extremism policy
In another sign of their rapprochement, May’s former chief of staff, Nick Timothy, will take over the New Schools Network. This was set up by former Gove aide Rachel Wolf to get more free schools open.
Timothy, who ran the Tory campaign that beat Nigel Farage in Thanet South at the Election, is an exceedingly effective operator. But he will need to be if there are to be 1,000 free schools open by 2020.