In Birmingham this week all the talk is of two dates. There’s 2015 of course, but also 5 December this year, because that is when George Osborne will have to spell out (in the autumn statement) how the coalition is planning to respond to our continuing lack of growth.
Since Osborne delivered the Budget in March, Britain has slipped back into recession and the Conservatives have undergone their most difficult period in government, and this has only added to the importance of the autumn statement.
Both sides are acutely aware that within weeks, the Office for Budget Responsibility will present the coalition with its economic forecasts. These will reveal how far off the coalition is from having national debt falling as a percentage of GDP by 2015-16, its key fiscal target. At which point, the government will have to decide whether to cut more to meet it or simply abandon it.
Nick Clegg has tried to pre-empt this debate by telling his party faithful that the Liberal Democrats would enact ‘not a penny more, not a penny less’ of the cuts that the coalition has already agreed. In other words: no new cuts. George Osborne, by contrast, has told Cabinet colleagues that he believes that the government will not be that far away from its target and would be mad not to try and meet it even if that meant more cuts.
Conservative Cabinet Ministers are quick to say, privately, that they agree with this analysis. They worry that jettisoning one of their main economic policies would reinforce the impression that the government doesn’t have, to use a very Tory word, grip.
In his conference speech, Osborne stressed how Ted Heath had flinched when the economic going got tough and lost. By contrast, Margaret Thatcher had doubled down and won. At least one secretary of state took that as a plea from the Chancellor to be allowed to do what is necessary in the autumn statement to meet this fiscal target.
Some in No. 10 view this fiscal rule as electorally irrelevant. They argue that the public won’t notice the coalition abandoning a goal that the vast majority of people never knew it had in the first place. But many of the Chancellor’s allies take a different view. They believe that there’s considerable political mileage in being able to say at the next election that the hard years of austerity have started to bring the national debt down. They also worry that abandoning it would enable Labour to claim that the coalition has failed even on its own terms. This is particularly dangerous given that the coalition has to preserve its lead on economic competence for its two parts to have a fighting chance at the next election.
Whether or not Osborne gets the chance to try and meet this rule will largely depend on Vince Cable. Clegg will not make any big move on economic policy without Cable’s consent. The Deputy Prime Minister is leading his party in coalition with the Business Secretary.
The hopes of persuading Cable, though, will probably turn on his relationship with the Chancellor. The two men have regular bilateral meetings and a surprisingly good relationship. Each regards the other as someone he can do business with. The Cable-Cameron relationship is far trickier. The Prime Minister has never hid his irritation at what he regards as Cable’s destabilising interventions.
It is, though, hard to see how Cable, who believes that this current crisis is one of demand, can be persuaded that the government should take money out of the economy. Although one wonders if the Business Secretary’s worries on this front could be assuaged by appointing a Governor of the Bank of England who is prepared to use quantitative easing to support house-building and the like.
Cable’s views are so important because he is the alternative Liberal Democrat leader. At the highest levels of the coalition, it is regarded as almost certain that he’ll make a bid for the party leadership before 2015. Those planning the 2015 Conservative campaign are doing increasingly detailed work on how a Cable-led Liberal Democrats would change the electoral landscape.
Ed Miliband’s conference speech has already begun to redefine these contours. It has given him a platform from which he can be heard; he has finally escaped the question of whether he is the right Miliband for the job. In a rebuke to those in No. 10 who have long said that Ed is not as electable as David would have been, several Conservative cabinet ministers have said that they always thought he was the more able brother. Iain Duncan Smith even boasted that he had won money betting on the younger Miliband.
The speech has also persuaded Cameron that he needs to articulate his own vision. Like George Bush senior, another pragmatic Conservative, Cameron has always been chary of ‘the vision thing’. As one member of his circle puts it, ‘He has always had a view that it is not very English to go on about your vision. You should just do things.’
But Cameron has been persuaded that since the results of what the coalition has done will not be self-evident by the next election, he needs to give the country a clearer sense of where he is trying to take it. His conference speech was the clearest articulation of this yet. The emphasis on education and welfare reform and his frankness about the challenge facing the country made it the best one he has given in five years. His warning that the choice was ‘do or decline’ was a preview of what his message will be at the next election.
It was also striking how personal the speech was. The Prime Minister remains his party’s biggest asset and he needed to remind the country of why it warmed to him in the first place.
The next election will turn on two things, whether people feel the country is getting back on track and whether they still prefer Cameron as Prime Minister. As the Conservatives left Birmingham, the party had a clearer sense of direction on both these points than it has had before. But it’ll need them now that the prospect of Prime Minister Miliband can no longer be dismissed out of hand.
Comments