Tuesday, 27 December 2011

George Osborne should be looking after the purse-strings, not the politics – Telegraph Blogs

Osborne is the PM's personal coach (Photo: Andrew Parsons)

The Chancellor is too close to the Prime Minister for Britain’s economic good

It is not properly appreciated, except among Treasury officials and the Downing Street inner circle, that George Osborne is only a part-time Chancellor of the Exchequer. On the one hand, Osborne is in charge of the national finances at a time of the gravest imaginable economic crisis; on the other, he is equally active and energetic as the chief strategist to the Prime Minister.

Here are the facts. On an average day, Osborne will arrive at the Treasury shortly after 8am. There he will convene a very brief meeting with officials before strolling up Whitehall to join the morning strategy meeting at 10 Downing Street. He does not attend the latter in his capacity as finance minister. Rather, he forcefully expresses his opinions across a very wide range of policy and political issues.

Once this meeting is over, the Chancellor does not, as one would expect, go back to the Treasury. He lingers on in his makeshift office base in Downing Street. Treasury officials, if needed, will be called over from their headquarters in 1 Horse Guards Road. Often, they are not required. On Wednesday mornings, for example, the Chancellor will spend approximately an hour coaching David Cameron for Prime Minister’s Questions. He often wanders into the Downing Street press office to discuss media handling problems, or into Cameron’s private office for a chat.

Only after lunch will Osborne return to the Treasury. But he will not stay there for long. By 4pm, he is back in Downing Street again for the regular afternoon meeting with the Prime Minister and the inner circle of Downing Street advisers. If Cameron is away, Osborne will chair that meeting. Then it is off to the Treasury once again, but Osborne likes to be back in Downing Street at the latest by 6pm.

It must be stressed that it is completely unprecedented for a serving chancellor to play this kind of double role. If Britain were a company, Osborne would simultaneously be the chief strategist, the finance director, and the personal coach to the chief executive, an unhealthily diverse confusion of jobs.

There are advantages to the arrangement. It minimises (though does not altogether eradicate, and, in the long term, may even make more likely) the possibility of the kind of bitter falling out between the Treasury and No 10 of the kind that took place during the Blair/Brown era. It ensures that the Prime Minister and the Chancellor have identical objectives and agendas.

Furthermore, Cameron is addicted to Osborne, in rather the same way that Tony Blair was addicted to Peter Mandelson, and for the same reasons. He feels that he cannot do without Osborne’s ingenious political brain.

This, while understandable, does raise other very serious issues. The Chancellor is devoting perhaps half his time to sorting out problems which have nothing to do with the national finances. To give just one example, he was recently heavily embroiled in dealing with the Liam Fox business at a time when the British economy was being jeopardised by the darkening euro crisis.

Treasury officials worry that they can’t get face time with their boss. Many people will find it very shocking that the Chancellor of the Exchequer, faced with economic calamity, is not working flat out on his job.

But this daily diversion of precious time and energy is not the only problem. Even more disturbing is the conflict of interest. Chancellors of the Exchequer should have one over-riding purpose: the safeguarding of the national finances. But Osborne also gives high-level political counsel to the Prime Minister. He cannot perform both of these roles with integrity because they are completely contradictory. Put simply, prime ministers like to spend, while it is the job of chancellors to save. Indeed, it is this constitutional duty to keep the national finances intact which explains why the greatest chancellors have always enjoyed edgy and uncomfortable relationships with Downing Street.

Most people would agree that the four greatest chancellors of the post-war era have been (in chronological order) Roy Jenkins, Denis Healey, Geoffrey Howe and Ken Clarke. All four frequently found themselves at odds with No 10. To this day, Harold Wilson’s political strategists believe that Jenkins lost the 1970 general election for Labour because of his notoriously austere, though patriotic, Budget a few months earlier. Likewise, Clarke insisted on raising taxes and cutting spending ahead of the 1997 election, to the vast annoyance of John Major’s campaign team. He believed that he was doing the right thing for the country.

One of the reasons why Gordon Brown will go down in history as such a bad chancellor is that, at election times, Tony Blair made the appalling mistake of putting him in charge of campaigning, a completely inappropriate role for a chancellor. This act of madness partly explains Brown’s chronic overspending, and the disastrous legacy that he left behind for the incoming coalition government.

To be fair to Cameron and Osborne, their close proximity has only recently begun to cause problems. Osborne’s emergency Budget last year, which went such a long way towards reassuring the financial markets, was prepared jointly with the Prime Minister and no harm was done: quite the reverse. Wednesday’s Autumn Statement was not, however, the kind of package that one would expected from the sober guardian of our national finances.

Instead, it was a clever political fix, blatantly designed to solve short-term problems: a £50 cut in water bills for voters in the South West, free childcare places for two-year-olds; a restriction on rail fare increases (personally brokered by David Cameron); £50 million for sleeper trains. Much of this was either gesture politics or vote-buying, mainly for the benefit of the Lib Dems.

Almost all of it was leaked in advance as part of a careful strategy of media manipulation. (Speaker Bercow really ought to have slapped down Osborne for this serial contempt of Parliament. I assume that he felt unable to do so, having allowed Alistair Darling to do the same thing before the last election due to his blatant partisanship towards Labour.)

Worst of all was the weak-minded strategic decision to abandon last year’s promise to balance the books before the general election. This, too, smacks of expediency. To sum up, Wednesday’s missed opportunity of an Autumn Statement was authored by Osborne in his role as sharp-suited No 10 political strategist, and emphatically not in his role as the beady-eyed watchman of the national finances.

It is easy to understand why Osborne and Cameron should have wanted to enjoy such a close relationship. During their nearly five years in opposition, they had in front of them the example of Blair and Brown, who hated each other so much that government became paralysed.

Yet in order to head off that danger, they have created another difficulty. They have become much too close. They have got away with it up to now, but as time passes – and especially as the election approaches – this proximity will become intolerable. David Cameron urgently needs to decide whether he needs his friend Osborne as chancellor or as political strategist. He can no longer be both.