Spending review 2015: Osborne’s tricks – and how to spot them
If by some freakish series of accidents you found yourself watching George Osborne deliver the spending review this afternoon, you could have been forgiven for thinking that Britain has never had it so good. The chancellor seemed relaxed, even jubilant. Almost everything he said involved spending. The bad old days of austerity and Greek-style chaos were over. Once again, sunshine ruled the day.
Which is odd, because he was actually unveiling a plan to slash public spending. The cuts are so severe, in fact, that by 2020 departmental budgets will be at 50% of where they were when the Tories entered power in 2010. The cuts will be worth £12.2 billion a year by 2019/20. Oh and there'll be £28.5 billion in tax increases too.
Partly, this is just how things are done. The chancellor gets up, announces all the good bits, then journalists go and read the small print of the document and see what's really going on. But Osborne also has tricks which are uniquely his own.
One: Ring-fence political risks
The first thing Osborne always does is ring-fence the budgets which might cause political problems down the line. That old stereotype about Osborne being a supremely political chancellor is entirely correct. Most of the decisions he makes during these events are politically, not economically, motivated.
So, for instance, pensions are protected, because older people are more likely to vote and more likely to vote Tory when they do. The NHS is protected, because Labour's most potent political attack is that – you can almost say it by heart – "you can't trust the Tories with the NHS". International aid is protected, because the Conservatives don't want to be seen as cold-hearted ideological saboteurs, but instead as moderate financial realists.
That's also why Osborne has ended up protecting tax credits – which, surprisingly, he did a full-blooded 100% U-turn on – and the police budget. The anger from the Sun and that viral video of the crying Tory voter on Question Time showed how politically toxic it could be to cut tax credits for the working poor. And in the wake of Paris, it was clear the police would argue that cuts to their budget would increase the risk of a successful terror attack. That's just too much of a political risk to take, especially if one actually is successful. So suddenly, as if by magic, it was protected.
Two: Focus on totemic good-news stories
Osborne will look at each area of spending, put together a plan to improve a handful of items – ideally press-friendly symbolic issues or government policy with strong polling – and then make the entire debate about that.
In education, free schools will do fine while comprehensives will be hammered. In housing, affordable housing (NB: it's not really that affordable) will be expanded, but social housing looks to be gradually going extinct. On energy, about 24 million households will save about £30 a year on bills due to a cheaper domestic energy efficiency scheme – but the Department of Energy and Climate Change is losing 22% of its budget. London's transport infrastructure will be boosted by £11 billion, Oyster cards possibly rolled out nationwide and several rail lines will get funding for electrification – but the Department for Transport budget will be cut by 37%.
A classic example of this tactic came in the move on 'tampon tax'. This is a financially miniscule issue – it accounts for £15 million in VAT a year – but it's powerfully symbolic. As VAT is a tax on luxury items, the fact it is levied on sanitary products is (rightly) considered proof by many feminists that the economic system is created by, and run for, men. Osborne actually messed this one up a bit by comparing it with the Libor fines against banks, something which triggered waves of baffled anger among feminist commentators online. But the technique is the same as always: Take this press-friendly thing here, make the conversation about that, and meanwhile do all the real work when no-one is looking.
As our guest blog from Sisters Uncut said today, since the Tories came to power 32 specialist refuges for survivors of domestic violence have closed, 31% of women referred to refuges have been turned away due to lack of space and 39% of domestic violence victims have been unable to access legal aid. But don't worry about that. Look over there: shiny things.
The other example is tax credits. Following a tabloid backlash and a defeat in the Lords, Osborne said he was going to come back with new plans. As it happens, he abandoned the £1,300 cuts to tax credits altogether. It's not quite clear where the cost has fallen, but prizes for anyone who guesses that it'll be on housing benefit, universal credit and childcare eligibility. The working poor will still pay. But again, don't worry about it. Look over there at the shiny things.
The tax credit U-turn will lead most editions today. Osborne took that hit, knowing Labour wasn't strong enough to profit from it. By tomorrow we'll all be talking about David Cameron's fight to bomb Syria in the Commons. After that, the debate will be long gone. But the measures undertaken today will remain.
Three: Over-egg pre-briefings
Osborne's team have done a very good job of lowering expectations in the weeks ahead of the spending review. During this period, they tend to massage apprehension. They would have known for some time that they were planning a full U-turn on tax credits, but they were careful to suggest that Osborne would be pursuing something less than that. Even though Theresa May was late to No.11 with her budget plans, they also knew they'd save the police, but that was not the message earlier in the week. No matter how bad the situation, Osborne makes it look worse so what he eventually ends up doing will be seen as tolerable.
Four: Backload risk
Osborne's last trick is one you can only really achieve with a compliant media. He's loved and respected enough by the mostly Tory-supporting press establishment that no-one really holds him to account for the goals he himself sets. The deficit, you may remember, was already supposed to be gone. Actually, that was the entire message of the Tories 2010 election campaign. And yet here we still are, planning for the next half decade of deficit reduction.
Similarly, the Office for Budget Responsibility (OBR) said Osborne will breach his own welfare cap in three successive years from 2016 to 2019.
Osborne's current spending reduction plans are incredibly tight, despite the extra leeway given to him by a positive outlook from the OBR. That takes the power to deliver on his promises out of his hands. If there is an international slow-down, which there are already signs of, his timetable will suddenly be out of reach.
But it just doesn't matter. The Tories completely failed to balance the budget by 2015 and they got elected on a financial competence ticket anyway. Osborne doesn't care that he almost certainly won't be running a surplus by 2020. It's immaterial. The press is on his side, most of the political class is signed up to austerity and the opposition is a mess anyway.
So he can afford to use these big-ticket spending promises because the risk is back-loaded to four years' time, when no-one will care anyway. We have literally heard less about Osborne failing his own central economic targets than we have about Ed Miliband eating a bacon sandwich. Osborne knows that and uses it to his advantage.
