The Guardian view on George Osborne: free and frightening

http://www.theguardian.com/commentisfree/2015/jun/04/guardian-view-george-osborne-free-frightening

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George Osborne is in a rare and happy position for a British chancellor: he is under no real pressure at all. His place in No 11, next door to his best friend in politics, is entirely secure. Credited by many Conservatives as the mastermind behind the party’s surprise outright victory, the backbenches are inclined to give him room to do things his own way, rather than nagging for immediate tax cuts. The opposition lacks a leader, and the markets are so hungry for government bonds that they are prepared to fund even crisis-hit Portugal for bargain-basement rates. HM Treasury can effectively borrow whatever it pleases.

So when the chancellor took his turn in the Queen’s speech debate on Thursday, the Commons was looking at Mr Osborne unbound. Had he wanted to cut himself a little slack, here was his moment. He would have had every reason. During an election campaign when hopes of a Conservative majority seemed like fantasy, the Tories had pledged a lot of wild things: accelerated cuts to social security and public services, a dash towards an unnecessary budget surplus, and retrenchment so unbalanced that it would fall 98% on public expenditure, and only 2% on taxation. But in a second hung parliament, all this would have been safely traded away in coalition talks. Now, with the wind in his sails and a Commons majority, Mr Osborne could have quietly diluted it all on his own without any real complaint.

As well as the political opportunity to retreat from the wilder shores of Austeria, circumstances provide an economic rationale for a rethink. New data this week shows that the service sector is slowing, suggesting that the disappointing GDP figures before the election, which many dismissed as a blip, might after all have indicated a recovery running out of steam. On top of that, in this week alone, both of the global institutions that define respectable economic opinion offered useful cover for a change of direction. The OECD cautioned against public spending being slashed back too fast, warning of the effect on the poor in particular. New IMF research, meanwhile, concluded that when a fetish is made of deficit reduction, the economic medicine can easily become more dangerous than the disease, because of the toll on investment and growth.

The chancellor, then, had every chance and every excuse for easing off on the chopping. Instead, however, he used his new freedom to recommit himself to his cuts, and indeed redoubled the immediate pain. By improvising a fresh £3bn of within-year reductions, which will affect all state services bar schools and hospitals, he rewrites the supposedly “long-term” plan that he set out in his budget a mere 10 weeks ago, to make it even more stringent.

A Treasury statement painted the new cuts as a minor technical matter – “further efficiency savings, tighter control of budgets to drive underspends”. But it beggars belief that officials have suddenly found real “efficiencies”, in the sense of smart ways to do more with less, which had eluded them in the March budget, and eluded, too, the authors of the Conservative manifesto. Faced with a sudden injunction to cut a budget that was supposed to be fixed for this year, public sector managers will not carefully hunt out the lowest value branches to prune. They will instead hack away at anything, however valuable, that they are confident they can lop off at speed. The Institute for Government on Thursday provided one instructive example of the hidden-from-view services taking a battering. Despite a stubbornly high prison population, the number of staff is down by over a third, and the incidence of serious assaults is up.

Emancipated by the new political situation, then, Mr Osborne could have granted himself room to pursue pragmatic economics. Instead, he has plumped for even more politics. At a tactical level, by stepping up the immediate cuts, he is seeking to repeat his great political success and great economic failure of 2010, when – by cutting early and deep – he snuffed out a recovery, but left himself room to soothe the sharpest pain before the next general election, which he duly did after 2012. He is also seizing his moment of opportunity to achieve a historic rolling back of the state. Not because the economics demands it, but – one must conclude – because he truly believes in it.