Osborne's date with political destiny

‘Make or break’ is doubtless an overused term in politics. Many are the times when it is said that a politician needs to make the “speech of his life” on such and such a day, only for the same old cliché to be trotted out again the next time he makes one.

Yet for Chancellor George Osborne, this Tuesday’s autumn statement on the economy is genuinely shaping up to be one of those dates with political destiny.

For years, Mr Osborne has been the man with the plan as far as the Tory Party is concerned, and his plan on taking over at No 11 Downing Street in May last year was straightforward and simple.

It was: sort out the deficit in the first couple of years, wait for economic growth to start kicking in again, sprinkle some carefully-targeted tax cuts around, and then win the next election hands down.

But it’s all gone horribly wrong. Far from providing a platform for new growth, 18 months of austerity measures have pitchforked the economy back towards the ultimate horror of a double-dip recession.

As such Mr Osborne’s masterplan for economic recovery – and outright Tory victory in 2015 – now looks hopelessly optimistic.

And of course, it is not just the fate of the economy and the government that is at stake here, but Mr Osborne’s own chances of succeeding David Cameron as Tory leader.

If recovery comes and the Tories win an overall majority next time, there will be nothing to stand between him and No 10. But if they lose – or are forced into another five years of coalition - it will be Mr Osborne who gets the blame.

All of which make Tuesday’s statement if not quite the “speech of his life” then certainly the most important he has made since that Tory conference address of 2007 which frightened Gordon Brown off from holding an election.

To succeed, he must somehow manage to reconcile two seemingly contradictory goals.

Firstly – and this almost goes without saying - he must manage to reassure the markets that the government remains serious about tackling the deficit.

But equally, he now needs to reassure an increasingly sceptical public that the government has a plan for growth – if not a ‘Plan B’ as Labour still insists on calling it, then at least a Plan A-Plus.

It is already clear from several strategically-placed leaks that switching more spending into capital investment in infrastructure is going to be central to Mr Osborne’s plans.

It all seems a far cry from the days when Margaret Thatcher commented sniffily: “You and I come by road or rail, economists travel on infrastructure” – but no matter.

Chief Secretary to the Treasury Danny Alexander gave an insight into the government’s thinking in a speech to the National Association of Housebuilders on Wednesday.

"We are shaking the Whitehall tree to make sure no-one is stockpiling capital that can be put to good use today. That's why next week's announcement will switch funds to capital spending plans,” he said.

This is all of a piece with Mr Cameron’s speech on Monday setting out measures to boost the housing market, both by encouraging the construction of more homes and by helping first-time buyers obtain mortgages.

And yesterday Deputy Prime Minister Nick Clegg got in on the act by pre-announcing a £1bn scheme to help the young unemployed, apparently to be paid for by further savings in other areas.

The risk for the government is that it will all be too little, too late to counteract the chilling effects of 18 months of what Labour leader Ed Miliband this week called “austerity rhetoric.”

But if he can use Tuesday’s statement to get the economy moving again at last, then it may yet all come right – for the coalition, for Mr Osborne, and most importantly for the long-suffering British public.

Lost North jobs still seen as a 'price worth paying'

Youth unemployment topping 1m. An additional 129,000 people out of work in the past month. The overall number of jobless at its highest level since 1994. This week’s unemployment figures told their own story.

If people were not already sufficiently well-appraised of the dire state of the British economy, Wednesday’s figures, coupled with more downbeat forecasts from the governor of the Bank of England, will surely have removed any lingering doubts.

Yet in the North-East, as is customarily the case when the economy as a whole is struggling, the picture is even bleaker still.

As The Journal reported on its front page the Monday before last, this region has seen a staggering 32,000 public sector jobs lost in the past year, while, public spending cuts notwithstanding, the number in London and the South East has actually risen by the same amount.

It is now more than a decade since the launch of The Journal’s original Case for the North campaign aimed at closing the economic divide with the South.

At the time, it was estimated that if economic growth continued at the same rate, it would take around 30 years to bridge the gap – a state of affairs which many of the region’s MPs and other political leaders regarded as intolerable.

I have to confess I don’t know whether any subsequent analysis has been carried out as to how long it would now take, but I don’t find it easy to hazard a guess as to how many more decades might have been added to that figure.

Back then, I wrote that the North-East cannot be expected to tolerate as a matter of course systemic imbalances in economic growth between regions, but in fact that has since become the unspoken policy of the British Government under both Labour and Tory administrations.

All of which makes the continuing debate over the direction of the economy perhaps more pertinent in this region than in any other.

For months, this debate has been stuck in a kind of stasis in which Labour endlessly and increasingly fatuously calls on the Government to adopt a ‘Plan B’ while the Government equally stubbornly insists it must stick to its course.

But this is now becoming more than just an arid intellectual battle between rival economic theories. People’s jobs, businesses and livelihoods are at stake.

The plaintive tone of Labour leader Ed Miliband’s speech to the Social Market Foundation on Thursday certainly conveyed the sense that a crisis point has been reached.

"Austerity at home, collective austerity abroad is no solution to the problems of jobs, growth or the deficit,” he said.

“Don't believe those who will tell you that any change in course will make us like Greece. The markets are as worried about the lack of growth in the economy as they are about debt levels.

"Knowing what we know now, about our economy, about growth prospects, about unemployment, about higher than expected borrowing, it would be the height of irresponsibility for the government to carry on regardless.

"I urge David Cameron: change course now, change course for the sake of our young people, change course for the sake of the country."

As it is, Mr Miliband is pushing at a partially open door in seeking a shift in the Government’s emphasis from deficit reduction to growth.

Chancellor George Osborne is understood to be working on a package of pro-growth measures to be unveiled in the autumn statement later this month.

They are likely to include a new job-creation initiative for the young unemployed, incentives for private companies to invest in big infrastructure projects, and a scheme to under-write mortgages for first-time buyers.

There may also be a rebate for high-energy using industries to alleviate the impact of green taxes, blamed by RTZ Alcan for Thursday’s decision to close its plant in Northumberland.

Some of that will doubtless help the North-East, as will Thursday’s announcement that Virgin Money, newly-enlarged with the acquisition of Northern Rock, will have its headquarters in Newcastle.

But it scarcely amounts to a regional economic policy, still less a strategy for tackling the enduring North-South divide.

Thirteen years ago, lost North-East jobs were seen by the then governor of the Bank of England as an “acceptable” price to pay for preventing the South-East economy from overheating.

Now it seems they are once again being viewed as a price worth paying.

Theresa May faces long-drawn-out demise

To kick off this week’s column, here are a couple of questions for political anoraks with long memories or people who were paying attention in school history lessons.

Number One: Who was the last British politician to move directly from the office of Secretary of State for the Home Department to that of First Lord of Treasury and Prime Minister?

Number Two: What do Reginald Maudling, Kenneth Baker, Charles Clarke and Jacqui Smith all have in common?

The answer to the first question is Viscount Palmerston in 1855. The answer to the second is that all four found that the job of Home Secretary proved to be their political graveyard, the exit route out of government from once-promising careers.

Before they came to grief, at least three of the above named had previously been mentioned as potential leaders of their parties - as indeed was the current incumbent, Theresa May, when David Cameron got into difficulties over his relationship with Rupert Murdoch’s media empire earlier this summer.

But such is the extent to which the Home Office is subject to sudden
political storms which seemingly blow up out of nowhere that it is scarcely surprising that Lord Palmerston’s 156-year-old record remains intact.

Ms Smith put it well in an article this week which simultaneously expressed sisterly sympathy for Mrs May while also gently managing to twist the knife.

"What is it about the Home Office that means we’re unsurprised to see the headlines explode in a frenzy of finger pointing, accusations, leaks and denials? More than any other British political institution, it has been the mirror that reflects back to people the things they worry about most – crime and punishment, equality and injustice, homegrown terrorists, noisy neighbours."

On the face of it, the similarities between the difficulties now facing Mrs May and those that brought down Mr Clarke in 2006 are striking.

Mr Clarke had to go after the Home Office took its eye off the ball over border checks and ended up letting a small number of individuals into the country who had been convicted of crimes overseas.

Granted, we don’t yet know whether any foreign criminals have been allowed into the UK as a result of the latest relaxation of border controls that occurred on Mrs May’s watch this summer.

But since we have no idea at all who actually was allowed in, this is surely just a matter of time and chance.

The key point at issue appears to be what degree of personal responsibility Mrs May exercised over the decision to relax border checks and whether operational staff went beyond what she actually asked for.

Brodie Clarke has quit as head of the UK Border Force after being accused by the Home Secretary of doing precisely that, although he vigorously denies acting improperly.

The argument has distinct echoes of another past Home Office debacle – the sacking of Derek Lewis as head of the prison service by Michael Howard in the mid-1990s.

On that occasion Mr Howard said Mr Lewis had had full operational responsibility for deciding whether to suspend the governor of Parkhurst Prison. Mr Lewis claimed that Mr Howard had overruled him.

So where does this current story go from here? Well, unlike many Home Office firestorms, this one could prove to be a slow burner.

Mr Clark will put his side of the story in an appearance before the Home Affairs Select Committee next week that is certain to make uncomfortable listening for Mrs May.

Even more ominously for the Home Secretary, he is threatening to lodge a claim for constructive dismissal - a case which Mrs May’s Labour predecessor Alan Johnson believes he stands a good chance of winning.

My own view for what it’s worth is that Mrs May has committed two cardinal political errors which may well ultimately cost her her job.

She has attempted to blame officials rather than accept that as a minister, the buck stops with her, and has thereby admitted that she is not actually in control of her department.

As Ms Smith put it: "In British politics, it has never proven a robust defence to admit that you don’t know the numbers on immigration, or to give any impression other than that you’re in control and becoming more controlling."

The story probably still has a fair way to run, but I suspect this may ultimately prove to be the decisive word on the matter.