Monday, 21 March 2016

Beware a wounded chancellor

It hasn’t been a good week for George Osborne. His budget started to come apart at the seams faster than any since 2012 and the Iain Duncan Smith affair seems likely to prove fatal to his leadership ambitions. But that doesn’t mean that the chancellor is no longer a force to be reckoned with.

The problem with the budget isn’t that it had holes. Nor that the projections showed that austerity was being extended by yet another year with even more government spending on tick. Both of these have been hallmarks of Osborne’s workings for all six of his years in office. What made this different was the lack of political nous. He is either missing a trusted confidante to check his workings (Danny Alexander perhaps?) or his mind was on other things. But something went very wrong.

The row with Iain Duncan Smith over welfare changes (or over Europe, depending on your point of view) is another example of the Tory party at war with itself. And there is no doubt that they do internal ructions better than anyone. IDS may be trying to portray himself as a social reformer who was frustrated time and again in his attempts to stick up for the poor, but far too few believe him. To my mind there are enough signs that his conversion is genuine to believe that it is probably true. The trouble is that after six years of failing to resign, IDS is perhaps coming out as a social reformer far too late.

But the row itself is deeply damaging. Perhaps for the Tory party as a whole, but most definitely for the Chancellor. Previously untouchable, he is perhaps being saved from more on his own side calling for his departure by having Jeremy Corbyn doing so. Perhaps for the Labour leader a lesson in recognising when to keep quiet might be in order.

The real reason Osborne is not yet in danger of having to go is the network of supporters he has in government. More than half of all ministers can be classed as friends of the chancellor and while some of them may abandon a leaking ship, enough will stay loyal - at least at the moment - to give him a chance to recover. The task for his opponents is to work out how to strip away enough of his remaining support to see him gone. The challenge for the Prime Minister is to work out when his most prominent colleague and best friend in politics has become too much of a liability to keep around. For Osborne himself, the question is what does he do next?

It’s likely that his leadership ambitions are holed below the waterline. So who does he now back? His position as kingmaker is, for the time being at least, still secure and he has any number of possible runners from within his own stable. The Tory Party rules state that each possible candidate needs to be nominated from among their MP colleagues. The parliamentary party will then vote to narrow the field to two before the entire membership has the final say.

Logic dictates that the final two will be Boris against the chancellor’s favoured candidate. But Osborne knows that his choice will have a tough time up against the Mayor of London and so he will be holding a series of private primaries of his own to test the relative strengths of the potential challengers. He can only afford to have one candidate actually take part in the MP’s vote or risk dividing his forces and failing to make the top two at all. At the same time, he will be looking for means of weakening the favourite. Osborne is enough of a pragmatist that, if it comes to a situation where none of his own stable look likely to win, he can switch his support to Theresa May.

Osborne is wounded enough (and yet not too much) that he is now likely to have to stay as Chancellor for the remainder of Cameron’s premiership. At this time last year, when he was favoured to be next leader by 50% of those polled, it seemed that Osborne would step into another role - presumably Foreign Secretary - for a couple of years before the leadership contest. This would broaden his political experience and allow him a certain amount of deniability over any economic woes that might befall the country. His replacement at Number 11, of course, would be a person of his own choosing.

Now that scenario is gone. Any move away from the Treasury would most certainly be a demotion and Osborne’s replacement would be likely to be chosen from among the ranks of the neutrals rather than his friends. People who would have no trouble blaming their predecessor for past mistakes.

Much of that is for the future. For the present, the Chancellor is a wounded beast. He is very angry and capable of taking down almost anyone his mind sets against. The PM will be seeking to get his mind back in the game - focusing on repairing the hole in his budget. How much he succeeds in this will be crucial for the remainder of this Parliament.

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