1 February 2016

George Osborne probably won’t even stand to be the next Tory leader


I’m now back in a very snowy Washington – waiting to see if the Republican Party’s core supporters are as “mad” as the Labour Party’s Corbynistas in both of the most common understandings of that word. During my month back in Britain, however, I caught up with as many MPs, commentators, pollsters and friends as I could. What did I learn? Here are nine conclusions…

1. The government of Britain has been suspended until July 2016

MPs are underworked. No great legislation is being debated or passed. Difficult decisions are being delayed (eg Heathrow and cuts) and some kicked into the long grass (welfare cuts). Message control and government-by-grid is as strong as it was under (Sir) Lynton Crosby. Parliament (whether it likes it or not) and the executive are effectively in avoid-controversy/ pre-election mode as Downing Street prepares for June’s referendum on the EU. Cameron and Osborne know they maximise their chances of keeping Britain within a largely-unreformed EU if the referendum doesn’t also become a referendum on an unpopular government. This is as wise tactically on their part as it is disappointing to see Eurosceptic ministers implicitly connive in this lost year. One Cabinet minister told me to view this parliament as an Australian-style three year term that will begin after Brexit has been rejected and end in a snap election in 2019 – shortly after the new Tory leader has been chosen.

2. Expect the next general election to be in May 2019

By all accounts David Cameron is enjoying being PM more than ever before. He likes having a majority and the Whitehall machine dancing to a blue-only tune. Her Majesty’s Opposition isn’t much of one under Jeremy Corbyn. He is also pleased with the way Eurosceptic ministers are privately falling into line – one after another – to back what he now believes will be a bigger renegotiation than was thought possible in the autumn. Providing he does win the EU referendum he won’t announce his departure until mid-2018. The party conference of that year will resemble the Blackpool party conference of 2005 where wannabe successors audition before the watching party and nation. Although there is some suspicion that the Feldman Review is an attempt to dilute the power of Tory grassroots members to choose Mr Cameron’s successor I suspect the 100,000 or so grassroots Tory members will – for the first time – install a sitting PM. A new Tory leader and prime minister will be chosen in December 2018 – giving him or her six months to strut across the national stage as prime minister and then go to the country in May 2019 in order (unlike Gordon Brown) to seek their own speedy and personal mandate.

3. George Osborne didn’t fix the roof when the sun was shining

It’s perfectly possible to argue that if the Chancellor had hit his deficit elimination target by last year – as the coalition had promised – the extra austerity would have meant the Tories wouldn’t now have a Commons majority. More interesting (although see point one) was his decision (without any Liberal Democrats to blame) in November’s Autumn Statement to continue with his pre-election soft-pedalling on austerity. Now that the world economy is faltering (slow growth could be the new normal for many years to come) his gamble that rising GDP would finish the job of mending the public finances looks unlikely to come off. Moreover, the UK economy has not been rebalanced during his time at Number 11. Capital spending remains low, London dominant, manufacturing weak, the trade deficit dangerously high. And a new imbalance has been created too. Certain parts of the state (such as local government, defence and legal aid) have been squeezed while other parts of the state (notably pensions and overseas aid) now eat up a much larger share of state expenditure. This is unlikely to be sustainable.

4. George Osborne probably won’t even stand to be the next Tory leader

Only four months ago the Chancellor was the hot favourite to be David Cameron’s successor. Since then we’ve had his tax credits debacle; his Google misjudgement; the likelihood that economic growth won’t rescue him from difficult fiscal decisions; and more polling evidence that the public still don’t much like him. The wheel of political fortune might turn again but if the PM really does intend to carry on until 2019ish it may be that an unexpected insurgent will inherit the crown. One year before Thatcher, Major, Hague and Cameron became Tory leader they were not on many pundits’ radar. We probably shouldn’t make firm predictions about the next occupant of Number 10 until at least early 2018. I’ll even try to observe that rule myself but don’t be surprised if Mr Osborne chooses to become the campaign manager for someone else rather than run himself.

5. Brexit could end up with only five Cabinet supporters

Those five being Iain Duncan Smith, Chris Grayling, Priti Patel (the Leave campaign being a real chance for her to confound those who think she lacks intellectual range), Theresa Villiers and John Whittingdale. Many of us will conclude that the Euroscepticism of the Tory Party is not what it should be and this, frankly, will be a gift to Ukip – a gift that its increasingly eccentric leadership is perfectly capable of throwing away. While I sense a very strong desire across the Tory family to conduct the Brexit debate in a civilised manner so that post-referendum reunification can be secured, unhappiness could quickly follow the expected “Remain” outcome. By 2017 the economy may be weak, austerity deepening and immigration could be rising (even as a newly associate EU member we will be as unable to control our borders as we are now). Tory voters won’t be happy.

6. The Scottish card might soon get torn up by the English

It has been said that if a stranger steps on an Englishman’s foot it is the Englishman who apologises. If the foot is trodden on again the Englishman will turn towards the stranger with a portentous stare. A third stamping incident will be met with an English punch on the impinger’s nose. I remembered this story when I read of warnings from William Hague and Tony Blair that the Union would be in peril if the rest of the UK (excluding Scotland) votes to enjoy the same independent nation status as America, Australia, Canada, India and New Zealand. Scotland can’t forever be saying: give us the Barnett formula or we’ll leave; no more foreign wars or we’ll leave; no Trident renewal or we’ll leave; no more austerity or we’ll leave; no Brexit or we’ll leave. We’re either a grand, historic, romantic Union or we’re a finely-balanced contractual negotiation. If the Union is increasingly reconfigured as the latter it is doomed and rightly so.

7. There’s plenty for a majority Conservative government to do – if it has the will and imagination

Despite the pre-referendum mode the government is still busy announcing (as Paul Goodman has described) but the announcements aren’t particularly deep. I’ve already written about the shallowness of the PM’s “all out assault on poverty”. The big agenda should be the reform of capitalism or it won’t be long before some kind of tables-upender like Trump or Corbyn does hold some political power. This week’s Google tax imbroglio is a reminder that some things are taxed too little (like global companies, luxury goods and high value properties) while other things are taxed too much (the incomes and expenditures of the low-paid). A reform of capitalism agenda would also include changes to CEO pay, more prudent mortgage tests, a real end of too-big-to-fail, counter-cyclical monetary policy, more dynamic patenting laws, a rethink of trade agreements and the introduction of a wholly new set of social and economic indicators (to capture phenomena like differential inflation rates and the uneven benefits of GDP growth). Oh, by the way, here’s such an agenda I prepared earlier! I’m confident that Nixon-in-China-style the Tories are the right party to lead such a reform agenda and from Ken Clarke to David Davis the party could largely unite behind it. It just needs someone to lead it. It could be the way for George Osborne to recover his mojo.

8. The social justice movement in the Conservative Party is building

I’m biased and not a bystander in this project (as ConservativeHome has noted) but a new parliamentary group has been established to help the Conservative Party becomes at least as fluent and thoughtful about a one nation agenda as it is about immigration, defence, tax or other “traditional” Tory issues. Despite what ConHome said this is not a “Tory Left” project. At the compassionate conservative group’s first meeting (addressed by Bill Gates) all traditional wings of the party were represented and long may that continue. I hope all of the candidates hoping to succeed David Cameron will appear before this caucus during the leadership election and be quizzed on their ideas for reforming capitalism, increasing housebuilding, bringing the “undeserved rich” down to size and harnessing tomorrow’s technologies for popular rather than sectional gain. If the Tories become the party of social justice as well as economic responsibility it won’t be the better-the-devil-you-know inadequacies of Jeremy Corbyn or Ed Miliband that keep them in power – voters will actively prefer them to stay in power.

9. Labour is no nearer normalisation

Although Dan Jarvis seems to be gathering donors and thinkers around him for the future… Although Peter Hyman, Joe Haines and Peter Kellner are recommending active resistance in the latest edition of the New Statesman… and although there are signs that the two biggest stars of the Twitterleft Owen Jones and Mehdi Hasan are becoming frustrated at Team Corbyn’s competence… the chances are that May’s tests of public opinion won’t be catastrophic for the man who wants nuclear submarines without nuclear warheads. Labour will win back London and Scottish Labour will retain second place in Holyrood. If, however, either of those results don’t transpire the Corbyn project could be in danger. If neither happen it will be in danger.

Tim Montgomerie is a columnist for The Times, a Senior Fellow at Legatum Institute and co-founder of the new website The Good Right. His “reform of capitalism” report for the Legatum Institute was published on 4th November.