Would Bad Economic News be Good Political News for George Osborne?

20 Mar 2016

 

 

“The world is a more uncertain place now than at any time since the financial crisis,” that was the message from George Osborne a week ago, ahead of the budget. 

 

 

Though partly expectation management ahead of his speech to the House on Wednesday, the “dangerous cocktail of risks” Osborne highlighted seem real enough. Oil prices have plunged, global markets are volatile, the Middle East is growingly unstable and the economic strength of the new global powerhouse China is in question. More broadly, economists note that in the post-war period nations face recession on average every 58 months. Britain has been growing for 73.

 

 

In the face of this the abandon with which Osborne has gone about warning of the dangers of a new forthcoming recession might seem surprising.

 

 

But could it be that bad economic news would boost the Chancellor in his political aims - avoiding British exit from the EU, keeping Labour at bay and ultimately beating Boris Johnson for the Tory leadership?

 

 

 

YES 

 

 

Brexit

 

 

The Chancellor has come out strongly in support of the Prime Minister’s position to remain in the European Union, to the point that his own political future appears similarly bound to the cause.

 

 

Recession would bring economics to the forefront of voters’ minds and this is an area of noted strength for Remain. It would also distract attention away from other issues such as the migrant crisis, which fuel popular support for Leave.

 

 

Battling Labour

 

 

The Conservatives ran the last two General Election campaigns on the narrative of “finishing the job”. That is fixing Britain’s public finances after the recession that occurred on Labour’s watch.
 

 

It is widely accepted that part of Ed Miliband’s failure at the polls was a lack of public trust in Labour’s handling of the public finances. A fresh economic crisis would draw public attention back to that issue, and polling suggests Jeremy Corbyn’s Labour find themselves trusted even less with the country’s money.

 

 

Beating Boris

 

 

George Osborne has cast himself as a sort of “necessary evil” in British politics. A hard Chancellor for hard times. If the Conservatives wanted a sunny, charismatic personality to lead the country forward in the post-Cameron era he is not the consensus pick.
 

 

However, plunged into further economic difficulty, it might be that his party would recognise Mr Osborne as a safer pair of hands than the rumbustious Mayor of London, who often finds himself criticised for a lack of focus on policy detail.

 

 

 

NO 

 

 

Brexit

 

 

The European economy is flatlining and another recession felt across the continent is likely to plunge the Eurozone into potentially terminal turmoil.

 

 

With the British people facing fresh economic strife, scrutiny would pile onto the costs to Britain’s membership of a growingly dysfunctional European project that seemed increasingly in danger of imploding. Remain might quickly find their economic argument slipping away from them.
 

 

Battling Labour

 

 

A second major recession, this time on the Conservatives’ watch would surely be hard to cast as Labour’s fault? If anything it would play perfectly into the hands of Osborne’s opposite number John McDonnell who has argued in recent times that capitalism’s instability warrants a new approach to economics.

 

 

The last crash saw a backlash against the political status quo all over the world. It might be that another one spawns the unlikely rise of anti-austerity Jeremy Corbyn in Britain, just as the previous one spawned anti-austerity SYRIZA in Greece.

 

 

Beating Boris

 

 

The Osborne plan to deliver a budget surplus by the end of the current parliament would be left in tatters by another downturn. He would face two options, to press on regardless with austerity that would likely stifle any recovery or attempt a U-turn of immense proportions.
 

 

If the Cameron-Osborne project became defined by the attempt to get Britain’s economy back on track, a second derailing might offer an opportunity for a new driver. A leader not associated with the previous regime would find ditching fiscally conservative plans easier than the current Chancellor. Enter Boris.

 

 

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