Osborne could still be a useful asset for the Tories
By
Simon Nixon Nov 21, 2008
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Osborne: not had a distinguished credit crunch
George Osborne has come in for a hard time recently – including from his own side. It's easy to criticise the shadow chancellor. He's not had a distinguished credit crunch. Much of the time he's looked out of his depth. And his policy pronouncements have tended to be too gimmicky, too timid, too inconsistent and too concerned with political point-scoring to carry credibility. Throw in his youthful looks and posh voice – which aren't his fault but don't help convey the necessary reassurance and gravitas – and it's easy to see why one distinguished Thatcherite elder statesman told me the other day he believed Osborne should be replaced by Ken Clarke, a man whose pro-European views have for years been anathema to the Tory right.
But I don't think getting rid of Osborne will solve the Tories' own political credit crunch. Apart from the damage it will do to David Cameron to part with his closest ally, it doesn't resolve the Tory's central dilemma: how should an aspiring Conservative party of government respond to the events taking place in the global economy? The calls for Osborne's head are really to do with presentation not policy, yet it is policy that's the biggest problem. In this respect, Osborne's perceived weakness – his focus on tactics over political principle – may turn out to be his greatest strength, particularly when it comes to spreading the cost of the crisis among taxpayers.
It's easy to forget what a tough hand Osborne has been dealt. The financial crisis is a huge challenge for any opposition politician – particularly a Conservative one. Osborne may have been out of his depth in the early stages, but so was everybody else, from the Chancellor, Alistair Darling, to the Governor of the Bank of England, Mervyn King. Even Vince Cable, the Liberal Democrat Treasury spokesman who is widely regarded to have performed well, has on several occasions spouted the most ridiculous nonsense – not least over his demand for the Government to reverse the independence of the Bank of England and his crude, misguided populist campaign against short-sellers.
It's also important to remember how far the crisis has ripped up the economic rule-book, which means that even those with a deep understanding of markets have had to make it up as they go along. Gordon Brown might present himself as the master of the moment, using his deep experience to lead the world out of disaster, but he has made policy on the hoof, desperately trying to shore up the economy by repudiating every principle on which he built his reputation. Even US Treasury Hank Paulson has struggled to stay on top, his various attempts to bail out the banks and insurers having to be constantly modified.
What makes the financial crisis peculiarly challenging for Conservatives is that it forces them to abandon their ideological moorings. Wary of bail-outs of any kind, hostile to government interference in the markets, conscious of the duty of governments not to debauch the currency or pile up debt burdens for future generations, Conservatives have nonetheless been forced to go along with all these things in the name of stability. That's the price we pay for operating a fractional reserve banking system, whereby banks keep only a tiny proportion of the assets deposited with them as cash and look to the central bank as lender of last resort. The crisis has stripped away the illusion that we operated in a free market system, as opposed to state-directed capitalism – a painful realisation.
If that makes a robust Conservative opposition to Government economic policy hard, Osborne's task is made harder by the fact that this is shaping up to be above all a middle-class recession. It is the Conservative's core voters – white collar South East professionals – who are likely to be among those hit hardest. Traditional Conservative hair-shirt policies – "if it isn't hurting, it isn't working" – that proved electorally successful during the Northern industrial recessions of the 1980s and1990s are likely to prove electorally suicidal this time. Osborne is right to worry about sterling if the Government goes ahead with a huge unfunded tax giveaway. But that is unlikely to stop anxious voters clutching at any financial straw that is offered them.
That leaves the Conservatives in a very difficult place. Unlike other recent downturns, where governments have been forced to do unpopular things such as raising interest rates and putting up taxes, this crisis has given Labour a free pass to do things that would normally be considered economically ruinous but are electorally popular. The Tories have the unpalatable choice of going along with it or carping from the sidelines. That choice is not going to go away, regardless of who is shadow chancellor. Instead, the Tories' best hope lies not in persuading people they have some magic bullet to end the crisis, but that ultimately they will spread the costs more fairly. That is the rawest form of politics – a job for a skilled political tactician like Osborne.
• Simon Nixon is the author of Credit Crunch: How Safe is Your Money? Priced £5.99, www.pocketissue.com
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