George Osborne’s Christmas was spent in the rural Hampshire home of his
father-in-law, Lord Howell, the former cabinet minister and one of the
architects of Tory revival in the desolate 1970s. So the festive ruminations
over dinner revolved around Conservative politics. “What is interesting is
that in my conversations with him I used to reflect how different were the
challenges he faced,” says Osborne. “Now I reflect on how similar things are
– a bankrupt country on the verge of becoming the sick man of Europe again,
with high unemployment.”
Much has been made of the transformation of Gordon Brown from dithering loser
to self-confessed saviour of the world. Less well understood are the
dramatic changes in 37-year-old Osborne, the second most powerful man in the
Conservative party after David Cameron. The scion of the Osborne &
Little wallpaper dynasty was a member of the Notting Hill set of Tories that
propelled Cameron to power; but while the Tory leader was the sensitive one
talking about hugging hoodies, Osborne had a gift for the cutting thrust,
notoriously once branding Brown as “autistic”.
His critics, while impressed by his guts and political brain, had doubts about
his maturity. Then, two months ago, came a scandal involving Peter
Mandelson, a Russian oligarch and a luxury yacht in Corfu. Osborne was
accused of using his summer holiday to solicit a donation from Oleg
Deri-paska, the controversial aluminium tycoon. The row tellingly coincided
with Brown’s mini bounce in the polls.
Yet Osborne has fought back doggedly in the Commons and in the broadcast
media. He now sees fiscal responsibility in almost Old Testament terms,
comparing Brown’s unfunded Vat tax cut with the “sins of the fathers”.
“There is a moral argument,” he says. “Is it fair to burden future
generations with the higher taxes and debts that you are not prepared to
shoulder yourself?”
We are in his Commons office, decorated with ugly cartoon caricatures of the
prime minister. On the mantelpiece is a bottle of Newcastle Brown,
relabelled “Bottler Brown”, a memento of a Conservative stunt following last
year’s election U-turn. Osborne, who clearly dislikes the Labour
administration at a basic, visceral level, berates ministers for “enjoying”
the economic crisis. “The Labour party is like a Pavlovian dog. They have
suddenly got very excited about a return to the 1970s with massive levels of
borrowing and government intervention. That, like the 1970s, is doomed to
fail,” he says.
As with the reformers of his father-in-law’s generation, he sees it as his
duty to curb a rapacious state that has run out of control. Recalling advice
given to him by Nigel Lawson, the former chancellor of the 1980s, he says:
“You don’t have to worry about tax – it is expenditure that’s the problem.
The ability of the chancellor to say no is a very important thing. It has
been lost under Gordon Brown. The Treasury is no longer the department
focused on getting value for the taxpayer pound.”
However, Osborne is also thinking about taxes and how to reduce them without
increasing the budget deficit, forecast to reach £128 billion by 2010. In
the new year the shadow chancellor will unveil a trio of tax cuts paid for
mainly by lower public spending. First, he will reverse Brown’s proposed 1%
increase in employers’ and employees’ National Insurance contributions –
income tax by another name.
“I am not writing my 2010 budget now, but my priority is to try to reverse the
increase in National Insurance because it is a tax that affects the vast
majority of people in Britain. It is a tax on jobs at a time of high
unemployment. It is a tax on incomes at a time when people will be under
severe strain,” he says.
He has two further measures up his sleeve to help savers and pensioners, whose
incomes have been the collateral damage of the recent interest rate cuts.
“They are innocent victims of Gordon Brown’s incompetence,” he explains.
“These are the people who did the right thing in the age of
irresponsibility. They behaved responsibly. They get penalised by the
understandable reductions in the Bank of England base rate.”
He does not want to go into the details of his plans, but it is understood
that among the proposals being considered are the abolition of the basic
rate of tax on savings – which would cost upwards of £2.4 billion – and an
increase in tax allowances for the over65s, allowing retirement incomes to
go further. Each £100 increase in the threshold would cost the Treasury £75m.
In addition to his duties as shadow chancellor, Osborne is also Cameron’s
general election co-ordinator, so the tax-cutting proposals will form part
of a new year marketing blitz. “I am not a fan of spending the entire
election budget in the last month,” he says. “I have seen that happen in
three election campaigns. Advertising and direct mail are things we want to
start before the campaign.”
He plans to install a clock in the Tories’ Millbank headquarters, counting
down to the last moment when Brown can call an election in May 2010; but if
Brown goes to the country early, Osborne insists he will be ready. “The team
is fired up,” he says. “When David Cameron says to Gordon Brown, ‘Call that
election now’, he really means it. We are on a war footing and we can stay
on a war footing for over a year.”
We wonder whether Osborne’s personal circumstances have been affected by the
recession. His £63,000-a-year MP’s salary is supplemented by a family trust
made up of Osborne & Little stock. The luxury home furnishings market
must have been hit hard by the twin collapse of house prices and City
bonuses.
The shadow chancellor ducks the question. “I am not going to go into Osborne &
Little’s prospects for the year ahead,” he says. “The only thing I would say
is this: I grew up in a manufacturing family business. I remember economic
downturns. I remember the effect they had on people. I am well aware that
the recession is causing great hardship with many families.”
Until “Yachtgate”, Osborne had been admired by Tory colleagues for his courage
in taking on Brown’s “clunking fist” – but he was not exactly the most
popular boy in class. Perhaps the rise of the youthful shadow chancellor –
St Paul’s, in London, and Oxford where he was a member of the tail-coated
Bullingdon club – was just too fast.
Unlike most Tories who now feel obliged, for reasons of money or political
positioning, to send their children to state schools, Osborne and his
journalist wife Frances defiantly put Luke, 7, and Liberty, 5, down for
Norland Place, the exclusive west London prep school.
So there was a certain amount of schadenfreude among the parliamentary party
when he took his tumble from grace in the autumn. There were backbench
mutterings that he should be replaced as shadow chancellor by someone with
more “bot-tom”, such as Ken Clarke. When asked about it, Osborne’s reply is
terse: “Ken Clarke is someone I have enormous respect for.”
He rejects suggestions that he should give up his role as election
co-ordinator to concentrate on his finance brief. “They are a natural fit,”
he insists. “The issue of the election will be the economy. This is not the
David and George show. There is a strong team in Central Office.”
He lists Andy Coulson, the Tories’ director of communications; Stephen
Gilbert, head of the target seats campaign; and James O’Shaughnessy,
director of research. But there is no unprompted mention of Steve Hilton,
Cameron’s charismatic guru who pioneered the Tories’ touchy-feely policies
on the environment and Africa. Hilton does his job mainly via e-mail from
California after his wife, Rachel Whetstone, landed a top PR job with
Google. So is he now a semidetached member of the team whose ideas are no
longer needed in these more austere, hard-edged times?
“I don’t want to go into individual members of the team,” he says, adding:
“Steve Hilton is a fantastic influence.”
There is a quiet resentment that never quite goes away between ordinary
Conservative MPs, who lack trust funds or City directorships, and the
privileged Notting Hill elite who run the party. “It is easy for David and
George to pronounce on expenses and pay, because they do not have to feed or
educate their children on a backbencher’s salary,” said one MP.
The disclosure last week that Cameron plans to let already privileged members
of the shadow cabinet keep their private-sector jobs and after-dinner
speaking fees, will only add to perceptions of a class divide. Osborne’s
hardline view on the generous parliamentary pension is therefore unlikely to
endear him to poorer colleagues – he wants the final salary scheme to be
closed down as a precursor to wider reforms. The voters, however, will
approve. “I don’t think you can justify the generosity of the MPs’ pension
scheme,” he says. “Closing the scheme to new entrants tends to be how these
things work. New members of parliament would move to a defined contributions
scheme. That sends a powerful message about our willingness to tackle
public-sector pension reform.”
Would he himself voluntarily opt out of the MPs’ final salary scheme? “I did
take a decision not to go for the more generous pension,” he says,
explaining the scheme’s complex two-tier structure. “It is an important
first step.”
Actions speak louder than words, of course, and he also hopes that his calm
handling of “Yachtgate” will count in his favour. What did he learn from it,
I ask.
“I am not going to be going to Corfu and I am not going to be getting on a
boat with Peter Mandelson,” he jokes, adding: “You have got to be careful
about the way things look. I didn’t break any rules, break the law, do
anything in that sense wrong. But it didn’t look good."
With classic Osborne chutzpah, though, he argues that the scandal was not
ultimately damaging but demonstrated why he would make a good cabinet
minister.
“You have got to show resilience in politics. If you take a knock, you have
got to show you can come back,” he says.
“If you can’t handle a bit of bad press, you are not going to be able to
handle the difficult decisions that a chancellor of the exchequer would have
to take. It is something I have learnt from. The biggest challenges of my
career lie ahead.”
With an early general election a real possibility, he’s right about that.
