Politicians make laws. Some politicians break laws. But there are also a handful of politicians who make laws and then break those very laws. Into this distinguished camp falls the chancellor of the exchequer.
George Osborne may not look much like your common-or-garden criminal, but there is another, darker side to the babyfaced occupant of 11 Downing Street. For the record shows that the chancellor has broken law after law since taking office — most of them of his own making.
In 2011 he legislated that local authorities should not be allowed to raise council taxes by more than 2 per cent unless they put the matter to a local referendum. Last year he apparently forgot about that commitment, permitting some councils to raise taxes this year by as much as 4 per cent if they needed to spend extra money on social care.
In 2014 Mr Osborne set a legal limit on government welfare spending. The welfare cap was supposed to be a watertight, not to mention statutory, obligation. Last autumn, having cancelled his tax credits squeeze, he went and broke the cap. In next week’s budget there is a real chance he may break yet another of his laws, missing one of the two legally binding fiscal targets he set himself barely a year ago.
Of course, being the second most powerful politician in the country — some would say the most powerful — all the chancellor needs to do if he is going to break the law is to change the law, an avenue which is, alas, unavailable to you or me were we caught speeding.
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In general, such powers should be used sparingly — especially by finance ministers. After all, an economy’s success depends not just on its dynamism and fiscal health, but on the predictability of policy. If investors cannot anticipate a government’s decisions they are less likely to invest, more likely to retrench and cut jobs.
However, Mr Osborne’s recidivism turns out to be one of his finest features. Don’t get me wrong: there is nothing more frustrating than a politician who constantly changes his mind — and the chancellor’s list of volte-faces is legend. There was his pledge to eliminate the structural deficit in his first term, ditched mid-way through the last parliament. There was the short-lived pasty tax in the 2012 “omnishambles” budget. There was the U-turn on tax credits and, only last weekend, his decision to ditch proposed far-reaching changes to the pensions system.
So many U-turns and 180-degree swivels has Mr Osborne performed that his chancellorship increasingly resembles an experimental dance routine. But the important question — far more significant than Mr Osborne’s personal fate — is whether any of this has damaged the economy itself. To this, the answer must be no.
“Have these U-turns damaged the economy? The answer is no
The chancellor’s decision to abandon his initial austerity targets was wise; ploughing on with extreme deficit reduction while the euro crisis was raging on the other side of the channel would have plunged the UK into recession; we now know Britain narrowly avoided a double-dip. The tax credits changes proposed in last year’s budget (while we’re on the subject, primarily pushed behind the scenes by Iain Duncan Smith, not Mr Osborne) were both harsh and unnecessary, given that similar cuts will occur under the universal credit. The pensions reforms under consideration might have undermined long-term savings in the country for decades. The welfare cap was preposterous, second only in ridiculousness to the fiscal laws the chancellor may break next week.
Mr Osborne has been responsible for some of the most foolish policies and laws devised by this government. But unlike many a lesser politician, at least he has put his hands up and abandoned them when they were exposed for what they were.
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Today, the UK economy’s performance is hardly stellar, but it is nonetheless stronger than most other leading economies. Employment rates are at their highest levels in history. Despite nursing enormous fiscal and current account deficits that leave it vulnerable to a capital market strike, investors are still willing to lend to the UK government at interest rates of less than 1.5 per cent.
They do so in large part because they believe the UK remains a good bet, because they still believe that Britain will repay its debts, and won’t embark on overly foolhardy economic policies. They do so because the chancellor has retained his credibility — not in spite of his U-turns, but because of them.
This is an unfashionable view within the Westminster bubble, where a change of mind is depicted as a career-shattering catastrophe. But for most Britons, and for most overseas investors, the short-term noise surrounding a budget matters far less than the notion that the chancellor is an adequate custodian of the nation’s finances.
So far, Mr Osborne has been a disappointing reformer but he still has time. The tax system is still too complicated; the welfare state is still unreformed; the deficit and the tax burden are still too high; productivity is still too low and the economy is still imbalanced. ButMr Osborne is now playing a longer game. Far more important for an economy still within touching distance of another crisis is boring stability.
Mr Osborne may like to style himself as the great political tactician. In reality, his philosophy has become two steps forward, one step back. And for all the likely fracas next week about U-turns and missed targets, this is how most businesses and most households like it.