It was a good morning's work for George Osborne, as he set out what a Conservative government would do to fix the economy
Politically, George Osborne's speech to the 2009 Conservative party conference was a considerable achievement – smart, well delivered and in some respects really quite brave. Intellectually and economically, on the other hand, a lot of it falls apart under scrutiny. But elections are won and lost on plausibility and mood rather than facts. Other things being equal, smart beats wrong. Which is why I think Osborne's speech will do the business for the Tories.
Osborne's leitmotiv was "We're all in this together". He has to say this because too many people suspect it's not the Tory way. The Tories have to have an ironclad defence against the charge that they will always stand up for the rich against the poor in hard times. It sits uneasily with the priority that the party still attaches to scrapping inheritance tax – and which Osborne merely deferred for a year – most people aren't in that one together with the shadow chancellor and his family. But Osborne said enough about how burdens must be shared in the recession and in the face of government debt, for the overall case to be defensible.
The big fault with Osborne's argument is his belief that governments must behave in the same way as individuals in economic hard times. He wants, he said, to move from an economy based on debt to one that is based on savings and investment. That sounds like the German model. Germans are individually thrifty in just the way that Osborne extols. They save. They avoid debt.
But the trade-off for that is that the German government goes into debt on their behalf to provide public goods and to see them through hard times.
Osborne, however, wants the government to behave like individuals and get out of debt quickly if it can. Keynes always argued that this would be a disastrous course – and even Samuel Brittan, no Keynesian, argued last week that the British political focus on debt is short-sighted and mistaken. But Keynesianism is a hard political sell, as Labour is currently finding.
Voters instinctively believe the Osborne approach rather than that of Keynes.
Osborne accordingly painted a very grim picture. We are swimming in a sea of debt, he said. We have to get back to sound finance. We are all in this together. Who could be against that? Well, Keynes for one.
Having established the case for spending cuts, Osborne duly delivered them.
This was a tough speech, with plenty of pledges, some of them new. It set out, with considerable clarity, what a Conservative government will be like on the domestic economic front. In its own terms, it was quite well done, though the love of populist gimmicks is becoming a feature of all Osborne's and David Cameron's speeches on these subjects. The idea that cutting ministers' salaries by 5% initially and then freezing them for the rest of the parliament is almost on a par with Cameron's proposal a few weeks ago that the Tories' answer to political disenchantment would be to cut the price of a pint of lager in the House of Commons bars. Andy Coulson's fingerprints are all over such proposals.
But Osborne cannot be charged with avoiding all big-ticket items. His announcement of the acceleration of the increase of the state pension eligibility age, well trailed overnight, is without question a big and brave move. The detail is carefully calibrated so as not to be a direct threat to those who will retire during the course of the next parliament – a prudent move, given that older voters are much more likely to turn out at elections. But in general this is a move that most people will understand, not just because of the current public debt but because in an ageing society people understand that they are likely to remain economically active for much longer these days than when pensions were first introduced a century ago. This is grown-up stuff, and the Tories deserve a lot of credit for putting the issue on the agenda. It also preserves the Tories' reputation for being the agenda setters on tax and spend, a key advantage over Labour which was further cemented by the commitment to a public sector pay freeze.
Labour will obviously try to cast all this as Tory cuts and Tory pay restraint. One can see the Morning Star headlines already. But Osborne was smart about guarding his back against some of the more obvious accusations.
It would be "grossly unfair" not to keep Labour's higher 50% income tax rate in present circumstances – though he didn't say anything about the threshold at which it would kick in. The budget must not be balanced on the backs of the poorest, he insisted. Basic benefits would be guaranteed. The pay freeze would not apply to the lowest paid or to the army in Afghanistan (the Sun will preen itself for that one).
It was a severe message – too severe, possibly dangerously and needlessly so when seen from a Keynesian stance – and it runs some political risks.
But there was enough balance for Osborne to count this a good morning's work. Progressive austerity was Nick Clegg's phrase a couple of weeks ago in Bournemouth. But it pretty much covers what Osborne promised today in Manchester too.
Copyright Speakers Corner 2016