IT MAY not be life by a thousand cuts, but there was no mistaking the calculated sombreness in George Osborne’s speech in the West Midlands yesterday.
The Chancellor said that, although the public deficit was down, and better economic figures were good news, the deficit was still massive enough to require big additional welfare cuts to give the country a fighting chance of recovery. Don’t think austerity is over, we’ve only got four years of it behind us, was the message.
It would be naive to assume there is no element of electoral strategy in the tone and substance of Osborne’s recent pronouncements on the subject. He could be trying to mould a win-win strategy for the Conservatives ahead of the general election in 2015.
If the economy fails to continue to pick up further and the public deficit fails to fall with sufficient vigour, he can portray the Conservatives as the party that tells it like it is, a potential future government with integrity that holds its nerve even at the risk of disenchanting voters.
This medicine, he is telling us, is for our own and our children’s good (more of that later), and we will have the Tories to thank in the longer run.
However, the economy and Britain’s place among the recovering nations rebounded much more strongly than expected in 2013. If that was repeated over the next year it might give the Chancellor latitude to rein in the bleakness and offer a few pre-election sweeteners.
Either way, one suspects the “grey” vote is being softened up for an attack on pensioner benefits (although specifically not state pensions) in the first couple of years after the election. That way the Tories could possibly both have their election cake and eat into the deficit afterwards.
Osborne rightly said that there were no soft options, telling his Midlands audience that if Britain is to fix the country’s problems – “and not leave our debts to our children to pay off” – then cutting the welfare bill further is the kind of decision the government needs to take. Osborne could be planning cuts in free bus and winter fuel benefits for retirees, measures that are hardly likely to feature in an election manifesto but which would be would be in the mould of similarly controversial moves that have followed election victories by parties of all shades: Margaret Thatcher’s poll tax in the 1980s, Gordon Brown’s raid on the pension funds in the 1990s and Nick Clegg’s reversal on tuition fees in the current administration.
Prime Minister David Cameron and his Chancellor may be prepared to gamble that pensioners, in particular the better-heeled among them, believe that young people have been saddled with enough student debt and dashed hopes of a step up on the mortgage ladder to deserve more support. For that reason a generational redistribution of wealth may be politically palatable to them.
Finance chiefs point to more help from banks
Good news that a survey by Deloittes says Britain’s chief financial officers (CFOs) believe the risk appetite for lending and borrowing has returned to both banks and companies respectively.
The CFOs of Britain’s biggest companies say lack of credit has hobbled the recovery, and their new optimism is linked to bank borrowing now being the most attractive source of corporate funding for the first time since the financial crisis began.
If that credit change spreads the wings of Britain’s economic recovery it will be very welcome.