Budget debacle that left Coalition floundering

Here's my annual political review of the year, published in this morning's Newcastle Journal.

Until the early months of this year, the Con-Lib coalition that has governed Britain since May 2010 had by and large done so with a fair wind behind it from the public.

Without ever reaching the heights of popularity enjoyed by New Labour as its zenith, David Cameron’s government appeared, at the very least, to have earned the benefit of the doubt, particularly when it came to the economy.

All that changed on Wednesday 21 March – the day Chancellor George Osborne delivered his third Budget.

To say it was the pivotal moment of the political year would be something of an understatement. In terms of its impact on public opinion, it may well prove to be the pivotal moment of the entire five-year Parliament.

In the space of a 59-minute speech, the Chancellor announced a package of measures which seemed almost deliberately designed to alienate as many sections of the electorate as he could find.

He slapped VAT on hot food and caravans, froze the age-related tax allowance for pensioners, removed a tax break on charitable giving that would have hit hundreds of good causes, and topped it off with a cut in the higher rate of tax worth £42,295 to anyone earning £1m a year.

It was the ‘pasty tax’ rather than the top rate cut which proved the most politically toxic, playing as it did into the ‘Tory toffs’ narrative which had increasingly started to dog Messrs Cameron and Osborne.

In the end, the plan was ditched following a campaign by this newspaper among others – one of a series of budget U-turns which left the Chancellor’s credibility seriously damaged.

From there on in, even though the festivities around the Queen’s Diamond Jubilee and the London 2012 Olympics provided useful temporary distractions, the government struggled to get back on the front foot.

And the slide in its opinion poll ratings was accompanied by increasing tensions within the Coalition itself – notably over Europe, welfare cuts, gay marriage and, most of all, Lords reform.

With his dream of a new electoral system shattered in the May 2011 referendum, deputy Prime Minister Nick Clegg was pinning his hopes of achieving lasting political reform on securing an elected second chamber - but the Tory backbenchers were having none of it.

The Lib Dems retaliated by scuppering the Tories’ plans for a review of Parliamentary boundaries that would probably have gained them 20-30 seats at the next election

Frustrated in his attempts to regain the political initiative, Mr Cameron resorted to the time-honoured tactic of a reshuffle, but some of his new appointments soon began to unravel.

He shunted Justine Greening out of the job of transport secretary on account of her opposition to a third runway at Heathrow only to see London Mayor and would-be leadership rival Boris Johnson rally to her cause.

His appointment of Andrew Mitchell as chief whip also swiftly backfired when he was involved in an altercation with police officers at the entrance to 10 Downing Street.

However in what has surely been the most interminable and convoluted political story of the year, Mr Mitchell now looks likely to have the last laugh, after it emerged that a police officer may have fabricated evidence.

In the North-East, the regional political agenda continued to be dominated by the fallout from the government’s spending cuts.

Newcastle city council responded to the spending squeeze by taking the axe to the arts budget – reminding those of us with long memories of the antics of so-called ‘loony left’ councils in the 1980s.

Yet at the same time, the year saw something of a rebirth of regional policy, driven by Lord Heseltine’s ‘No Stone Unturned’ report which was explicitly endorsed by Mr Osborne in his autumn statement.

The mini budget also saw the Chancellor forced to back down on plans to introduce regional pay rates following a fierce campaign by the unions.

The year ended with increasing speculation that the Coalition may not, after all, go the distance to the planned next election date of May 2015.

With the government seemingly stuck in a trough of unpopularity, the need for the Liberal Democrats to assert their separate identity from the Tories is growing.

Mr Clegg’s decision to make a separate Commons statement from the front bench on last month’s Leveson report into press regulation was unprecedented, but may well prove to be the start of a trend.

If 2012 was the year the Coalition lost the public’s goodwill, 2013 may prove to be the one that sees it splitting asunder.

At last: The beginnings of a regional economic policy

IN terms of the political big picture, Chancellor George Osborne’s autumn statement on Wednesday this week may well come to be seen as a pivotal moment in the next general election battle.

Whether the so-called mini budget will win or lose that contest for his party, however, is currently a difficult one to call.

On the one hand, the Chancellor was, against the expectations of most pundits and economists, able to reveal that the deficit is continuing to fall, and that government borrowing would therefore not need to increase after all.

On the other, he was forced to admit that the years of austerity would continue at least until 2018, that growth would continue to be sluggish, and that his original target of reducing debt as a proportion of GDP by 2015 would be delayed by at least a year.

Too much has been made of the fact that Shadow Chancellor Ed Balls, thrown by the unexpected news on borrowing, made an uncharacteristic hash of his set-piece reply to Mr Osborne’s Commons statement.

The truth is that only political anoraks get worked up about that sort of thing.  What will linger more in the public’s mind is the fact that Chancellor’s harsh medicine is still no nearer to bringing about a lasting economic recovery.

Of potentially much greater significance than Mr Balls’ incoherent ramblings is the risk that Mr Osborne’s failure to meet the debt reduction target will mean Britain losing its AAA credit rating.

Much of what Mr Osborne has done over the past two and a half years has been designed to stave off this very threat, and if the rating is indeed downgraded, it will surely be time for David Cameron to find a new Chancellor.

What, though, does it all mean for the North-East?  Well – and how many times have I had to write this line over the past 15 years? – there will be no dualling of the A1 north of Newcastle for starters.

Other proposals which failed to win the Chancellor’s stamp of approval included a £25m upgrade for the Tyne and Wear Metro, and a package of support for the region’s offshore wind industry.

Furthermore the proposed welfare cutbacks, with benefit rises for the next three years capped at a below-inflation 1pc, will also disproportionately hit those regions with higher rates of unemployment such as this one.

But amid all this, there are continuing signs that this government – more so than its recent predecessors – is starting to take the idea of regional policy seriously.

The most obvious indication of this came a few weeks when Lord Heseltine, the arch-interventionist of Tory politics in an era where the free marketeers held sway, published his ‘No Stone Unturned’ report.

The Chancellor has explicitly backed its call for a single funding pot covering housing, skills, transport and job creation as well new powers and funding for local enterprise partnerships.

Significantly, the government is to give each LEP the chance to nominate a single major infrastructure project which will then be eligible for a new concessionary public works loan rate, up to a value of £1.5bn.

In addition Whitehall will provide a further £350m towards the Regional Growth Fund, to provide support for jobs and growth across the English regions until 2015.

While the impact of those changes remains to be seen, a more immediate boost to the region came with the announcement that  - 54 years on from the opening of the Preston by-pass - Newcastle will finally join the motorway network, with all stretches of the A1 south of the city to be upgraded to motorway standard.

And the spectre of regional pay, which could have led to teachers and nurses in the North being paid less than their Southern counterparts, has also receded in what was a notable victory for both the unions and the Lib Dems.

It was surely coincidence that, on the day the Tories were pushed into fourth place by UKIP in the Middlesbrough by-election last week, Mr Osborne appointed a new adviser in Neil O’Brien who has previously warned that the party risks ‘pariah status’ in the North.

If the autumn statement is anything to go by, maybe he is already making his voice heard.

The hard choice facing Justin Welby

The reaction of the North-East media to the recent appointment of Dr Justin Welby as Archbishop of Canterbury says much about the unusually high regard in which he has come to be held in the region since becoming Bishop of Durham last year.


An editorial in The Journal described his appointment to Canterbury as a significant loss to the North-East and, with due respect to other church leaders in the region, few of them would merit such an accolade.

I have to confess I am a little biased where Dr Welby is concerned as we went to the same London church in the 1980s before he received the call to ordination, although I doubt he would have much cause to remember me.

There are many reasons why he will make a first-class archbishop, but in an age when many young people go straight from university into church leadership without the intervention of a career in the real world, the best thing about him is the grounding he gained from 11 years in the oil industry.

But if Dr Welby’s appointment was greeted by a general chorus of media approval, the universal disapproval that greeted this week’s decision by the church’s general synod to say no to women bishops highlights the extent of the challenge facing him.

It must be a moot point as to whether he or the new director general of the BBC, Tony Hall, has been handed the more poisoned chalice.

Whatever the rights and wrongs of the issue itself – and the beliefs are passionately held on both sides of the debate – it seems beyond doubt that the vote will make it harder for the church to get its message across.

The national and broadcast media has given the church a fearful kicking over the issue in recent days, and it didn’t take long for the politicians, from Prime Minister David Cameron downwards, to start joining in.

The broad thrust of their criticisms is that the church has shown itself to be out of touch with modern values and, as the former Labour Home Secretary Jacqui Smith put it, no longer reflects society as it is.

However it is by no means axiomatic that any faith community should be required to conform to the prevailing culture. Indeed, its belief system may at times require it to be vigorously counter-cultural.

To take a different example, there is a widely-held view in society that the accumulation of wealth and possessions is a good thing, and that our political and economic systems should be so arranged as to promote and encourage this.

Christianity, however, takes a different view, arguing not only that you can’t take it with you, but that, in the eternal scheme of things, the abundance of possessions may actually be more of a hindrance than a help.

So for politicians to suggest that a church should necessarily buy in to politically fashionable causes without reference to its teachings and traditions is too lazy an assumption.

No, the real difficulty arises here because of the particular nature of the Church of England as the established church and the role of its all-male bishops in the legislature as members of the House of Lords.

In this regard, it is surely significant that, while MPs mutter dark threats about subjecting the Church of England to equalities legislation over its failure to ordain women bishops, no-one is suggesting doing the same to the Roman Catholic Church over its refusal to allow women priests.

Indeed, if anyone were to suggest that the government should start regulating churches in this way, I suspect the resulting uproar would make the row over whether it should regulate the press look like a vicarage tea party.

Of course, a move to a democratically elected House of Lords, minus the bishops, would remove part of the problem at a stroke.

But Tory MPs foolishly voted down that option as part of their petty feud with the Liberal Democrats, and it is unlikely to come back onto the table before the next election.

The upshot is that unless Dr Welby and his colleagues can find some way of revisiting the women bishops issue, preferably before another five years of argument and bloodletting have passed, the church may be forced to make a hard choice.

Either accept the increasing and unwelcome intervention of politicians in its affairs – or take the nuclear option of disestablishment.