From The Lobby 54: Westminster

From:  
Jim Pickard, Chief Political Correspondent for the Financial Times, provides his insight into the current mood in Parliament in Wesminster

Wednesday 25th November was billed as a seminal moment in modern history. The Tory government – shorn of its soft-hearted Lib Dem coalition partners would inflict a second round of deep spending cuts on an exhausted public. There would be an outbreak of fury or even resistance by millions of people. 

Instead, George Osborne’s spending review came and went. There were reductions in departmental spending and benefits, for sure, but in the most contentious area of tax credits the Chancellor capitulated – dropping plans for a £4 billion cut. Deep cuts to police forces never happened, contrary to expectations. 

What changed? The Office for Budget Responsibility (OBR), the official spending watchdog, had produced more optimistic fiscal projections for the rest of the Parliament. That gave Mr Osborne some £27 billion of wriggle room. 

The New Year has not brought a flood of positive economic data, however. Growth expectations have been downgraded. And some sceptics in Westminster fear that the OBR – at the stroke of a pen – could yet force Mr Osborne to change tack once again. The Chancellor himself made a speech in Cardiff on 7th January warning of the gathering clouds on the horizon. 

“I worry about a creeping complacency in the national debate about our economy. A sense that the hard work at home is complete and that we’re immune from the risks abroad.”

Mr Osborne is an accomplished practitioner of the political arts, so – as always – his intervention was laced with ulterior motives. 

On the one hand, the Chancellor wants to get his excuses in early, just in case he is forced to rip up his spending plans in the face of weakening fiscal forecasts. He is also mindful that November’s spending review, while less painful than anticipated, still included billions of pounds of cuts – which will start to kick in in the coming months. Mr Osborne wants to stiffen the sinews of his own MPs as their post bags fill up with complaints from constituents. 
On the upside for mortgaged homeowners, corporate Britain and the self-employed, that means that expectations for interest rates have also changed. The first rise in rates for six years was meant to have happened by now. Instead, that could be delayed until the end of 2017, if money markets are to be believed. 

Mr Osborne’s speech was a clear rejection of Jeremy Corbyn’s demands that now is the time to ease off on austerity, not least because the deficit is still running at about £70 billion a year. Few in Westminster see Mr Corbyn as a prime minister in waiting, even if he can avoid being knifed by his own colleagues over the four years between now and the next general election. The 66-year-old, who never particularly wanted the job when he stood for the leadership, lacks support among his own mutinous MPs.

In terms of policy, he hopes to take Labour back to its 1983 manifesto – otherwise known as the ‘longest suicide note in history’ – by backing tax rises, unilateral nuclear disarmament and so on. 

He is struggling in the polls after making a series of controversial statements on everything from shoot-to-kill to flying pickets. Few psephological experts believe that Labour could win a major election when it looks so demoralised and divided. 

As such, the Tories are treating Labour more as a giant protest group than a genuine threat to their hegemony. Meanwhile, they are seeking to cement their power through a series of changes such as boundary reforms, cuts to opposition ‘short money’ and changing the way unions fund Labour.
For all the gloating, however, the Conservative party is heading for its own prolonged bout of infighting. Over what? Europe, as always. The party of the Maastricht rebels will look far from united in the coming months after Tory ministers were given the freedom to campaign on either side of the EU referendum. 

The EU choreography has already begun. Tuesday 2nd February saw the release by Donald Tusk, President of the European Council, of the outline of a long-awaited reform deal promising the “substantial change” that the Prime Minister wants for Britain’s relationship with the bloc. 

For now the talk is about obscure EU mechanisms, for example a temporary ‘emergency brake’ to restrict benefits for up to four years for new migrant workers. It’s not clear how closely the public is watching any of this just yet. Instead, the debate represents a low-level hum, for now at least, barely penetrating the broad public apathy over the institutions of the European Union. 

If the 2014 Scottish referendum is any guide, however, the debate in the run-up to the final vote is likely to reach a noisy crescendo, dominating all political discourse for months on end. Britain’s role within Europe – and in the world – is at stake: an ‘Out’ vote could also lead to Scotland leaving the UK. Prepare for fireworks.

 

Article by Jim Pickard

@PickardJE