2 min read

George Osborne - the new prudent Chancellor

You might have been a little surprised to have heard the tone of the Chancellor’s inaugural 2014 speech today. After all, the UK economy is powering towards a recovery – the most convincing one since the onset of the crisis. The deficit is falling (albeit slowly), the private sector is whirring into action and the size of the state has been gradually shrinking. To top it all off, the triple-dip many were forecasting this time last year never even happened.

And yet, here was George Osborne dubbing 2014 the “year of hard truths”, dwelling on the extra spending cuts needed in the coming years and reminding people that there remains a long period of difficulty ahead of us even now. On the face of it, this is rather odd, particularly since the £25bn figure (the extra post-election cuts) he emphasised was hardly new. We’ve known for some time that there were further cuts to come after 2015 – and the broad size of them.

The Westminster village thinks the explanation for his tone is largely political. By emphasising that the austerity package will need to continue after the election, the Chancellor, they say, is challenging Ed Balls to show his hand ahead of the polls. If the shadow chancellor agrees to go along with Osborne’s plans, he will look weak; if he dismisses them and pledges to borrow more (or indeed tax more), the Chancellor will leap on it as proof of irresponsibility, or, in the case of tax rises, political suicide.

While this explanation certainly has something to it – a sense that’s reinforced by the Chancellor’s enthusiasm for his new Fiscal Compact, which will provoke similar questions when it is tabled in Parliament this year – I prefer a subtly different explanation.

This is the default demeanour of a Chancellor. Throughout history, it has been the Chancellor’s role to affect caution and pessimism whatever the economic weather. And this has never been more important than now, in the wake of the biggest economic crisis in modern recollection. Under the surface, George Osborne is well aware that he has concocted a pretty big bounce in the economy – however, over the coming months he will do everything he can not to show it. The Prime Minister and his colleagues can and will declare “Mission Accomplished” but it is extremely rare for a Chancellor to do so: Norman Lamont and his “green shoots” speech was the exception that proved the rule.

However, maintaining this sensible demeanour is no guarantee of future success. The man I saw on stage this morning bore more than a slight resemblance to a younger Gordon Brown. Not, I emphasise, in physical or political appearance. The tone, though, was very similar. This was the prudent Chancellor – one who would remain tactically glowering and outwardly pessimistic even when the economy was going gangbusters. Though we forget it now, Brown spent most of his years as Chancellor being gently mocked by his colleagues for being overly cautious even when the economy was booming.

We all know what happened next.

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