Monday, 29 November 2010

Is it all working out for George Osborne?

Is George Osborne's cunning plan coming together? We're expecting the Office for Budget Responsibility to revise growth figures for 2010 upwards this afternoon, with growth projected to move from 1.2 % to 1.8%.

That may not sound like a lot but the effect could be to bring in £10bn of tax revenues. Osborne won't say that he'll change his deficit reduction plan on the back of that. But if the political waters get choppy he could now scale back ,for example, the extent of public sector job losses by close to 100,000, and that would have a huge effect.

The axe will still fall on benefits, spending and public service - with the economic crisis providing convenient cover for Osborne's ideological reform the state. But if growth takes care of half the deficit (as Darling always held it would and Osborne fully expects it to) then the cuts might not be quite so deep and voters could be left with the impression that tough-talking George isn't so bad after all.

In common with every other newspaper journalist in the land I've readily taken the line that the cuts are going to be " the deepest peacetime reduction in public spending" etc, etc. If the public in 2014 are left with the impression that we've been through the worst, and it wasn't that bad, and Osborne's tough rhetoric did the trick, they will be well disposed to the Conservative chancellor and his handling of the economy.

That's a nightmare scenario for Labour but the opposition has to base it's hopes on something more than the economy getting wrecked again. Osborne is a highly political chancellor and he will have been shaping a 2105 election winning strategy, and his part in it, every day since taking office.

A rider to this George conquers all thesis is that several economists don't think that growth this year is evidence that the economy is resilient enough to withstand the public spending cuts to be implemented next year. As Ken Clarke has pointed out, circumstances well beyond the UK chancellor's control could blow the econony off course. It could all go pear-shaped.

Another warming comes from Ireland, a subject Osborne will have to turn some attention to this afternoon when he reports to the Commons. The Irish economy grew in the first three months of 2010 as well - and promptly fell off a cliff. That's a political warning for Labour too. A month ago Ireland wasn't going to have a general election, now the government is facing the electorate in barely six more weeks. Is Ed Miliband ready for an crisis election, or does he need two years to think about it?

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