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p1 Cover: How to fix Britain p3 Leader: The Chancellor’s challenge p4-5 Contents p7 Portrait of the week p9 Diary: Brendan O’Neill p18 Deadly game: Michael Henderson p23 New York Notebook: Dylan Jones p31 Books and Arts: opening page p32-34 Books pages p46-50 Arts pages p69 Life: opening page
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The Chancellor’s challenge
First the good bit: the pronouncements of George Osborne’s early weeks at No. 11 helped to pacify investors who might otherwise have treated our government bonds to the same degrading treatment as those of Greece, Ireland, Spain and now Italy. As a result of a credible programme to reduce (albeit not eliminate) the deficit, confidence in UK government debt held firm and the Treasury is now able to borrow money at a shade above 2 per cent, rather than at the 7 per cent now being imposed on Italy. This is, today, the Treasury’s greatest single boast.
Unfortunately, however, Osborne has not kept up the momentum. Impending disaster averted, No. 11 ought to have begun churning out reforms to set the country on a path towards prosperity. The duty of a Conservative chancellor is not just to publish a five-year spending plan, but to identify and sweep away the many obstacles and disincentives now confronting those who would start companies and hire workers.
Yet the impression emanating from the Chancellor’s offices is one of inactivity. It is not that he is floundering for a plan B; the problem is that it seems he never really had a coherent plan A. Economic policy, to borrow an analogy from Mr Osborne’s family business, seems little more than wallpaper.Words like ‘deficit reduction’ are used, and phrases like ‘put fuel in the tank of the British economy’. But a disconcerting gap is emerging between the rhetoric and the ambition of the policies.
Soon, the Chancellor will publish his growth review. The good news is that there is much he can do. In this issue, various Spectator contributors have supplied their own proposals to revive the British economy. Readers will not agree with all of them, but they serve to show the range of options the Chancellor has at his disposal.
The contrast here between Britain and the US is remarkable. There, would-be Republican candidates compete with each other to come up with the most imaginative and radical ways to rebuild the economy. Herman Cain’s proposal for a flat tax of 9 per cent on income, corporate income and sales briefly propelled him to the front of the field. Cain’s campaign style might be a bit unusual for British tastes, but he and other Republicans are right to convey the clear message that, when it comes to the economy, this is no time to tinker. Radicalism is required.
Osborne once flirted with the idea of a flat tax in Britain. That now seems a long
Even Osborne’s admirers feel that he should be spending more time at the Treasury time ago. These days, he talks about his corporation tax cut as if businesses were unaware that most of the money they’d save would be clawed back by other tax rises. The Republican candidates talk about America becoming uncompetitive in a globalised world — ranked 63rd out of 142 countries for the damaging effects of tax, and 58th for competitiveness of government regulation. These figures, from the World Economic Forum, are quoted in America with horror — and rightly so. The UK fares even worse, ranked 94th and 83rd respectively. Yet this doesn’t seem to bother anyone on the front benches.
George Osborne has a demanding role. Not only is he Chancellor, he is expected to co-ordinate government policy more broadthe spectator | 19 November 2011 | www.spectator.co.uk ly. His predecessors wonder how he has the energy to do so much trouble-shooting in other departments, given that he is Chancellor during one of the most economically dangerous moments in British postwar history. There is little doubt that Osborne is a superlative politician, but even his admirers wonder if his brilliance is being spread a little too thin — and whether he should be spending more time at the Treasury.
There is much to do. Osborne has won the argument for making cuts, yet the government is spending only marginally less than Labour would have. Osborne’s cuts to government departments amount to about 3 per cent a year — it would have been 2.2 per cent under Gordon Brown. The Chancellor, for all his bold talk, is still clinging to the wreckage of Labour’s failed agenda.
It is time to let go. This time last year, when the world economy was recovering, it seemed that a more cautious approach to economic reform may have been workable. That’s not the case any more. British growth prospects are evaporating, as the Chancellor will confirm later this month. Unemployment, already at 2.6 million, is now expected to reach 3 million. Osborne can, of course, adopt the brace position and blame everything on the eurozone crisis, just as Gordon Brown sought to blame America. Or he can take the worsening economic outlook as a mandate for clear and radical reform.
There is plenty of ambition in David Cameron’s government. In education reform, welfare reform and policing, his ministers are carrying out an exhausting and much-needed restructuring. Mr Osborne is in many ways an unsung hero, having been instrumental in agreeing radical reform in other departments. But the Treasury now needs his full attention.