Bagehot
The imperial moment
George Osborne's grand budget and the trouble with democracy
Jun 24th 2010
Britain, a mostly peaceable, moderately rich, medium-sized, rainy country, doesn’t generally require such thinking from its politicians. The challenges they face tend to be technocratic. They tweak the tax code or fiddle with the National Health Service; they are not often called upon to alter the fates of millions with the stroke of a pen. The budget statement on June 22nd by George Osborne, the chancellor of the exchequer, may be about as close as a British minister has come since the second world war to the bold, savage generalisations Kapuscinski described.
Mr Osborne announced a two-year freeze on most public-sector pay that will pinch millions of public servants. Conversely, 880,000 people will be lifted out of income tax by the raising of its lowest threshold by £1,000 ($1,500). Unless the government finds further savings in the welfare budget—and the changes Mr Osborne has already specified to child, housing and other benefits will affect millions of recipients—unprecedented, cumulative cuts of 25% on average will be required in departments’ spending, except for health and international development. Meanwhile, Mr Osborne’s hike in value-added tax is expected to raise a swingeing £13.5 billion by 2014-15.
Daunting as they sound, it is easy to miss the meaning in these “large numbers”. And their impact has been somewhat ameliorated by the government’s concerted bid to prepare the country for bad news before the budget. But its import is seismic. Mr Osborne’s statement shattered and reversed the orthodoxy, which took hold in the last decade, that public spending must grow eternally. It has revised the relationship between the state and its employees, and signalled a reconfiguring of welfare support, which is set to be more generous to some of the very poor and stingier for many others. It was the start of a bid to create a new balance in the British economy: between the public and private sectors, and among industries and regions. This was the most painful budget in living memory, and one of the riskiest.
In its brief existence, the government has sometimes projected an air of levity—something about the youth of its senior members, their tielessness, David Cameron’s recent agreement to give the racing tips on the radio. No longer. Mr Osborne, once regarded as a lightweight, looks destined to go down as either a prophet or a byword for political villainy. There is one glitch in his imperial vision, however. It is that Britain is not a place accustomed to rule by distant and impersonal diktat. It is rather a politically fractious, perilously pampered democracy.
The long view
Behind Mr Osborne’s lofty ratio between spending cuts and tax rises, there are human beings. Lots now know they will have to pay up, but many of those who will pay the most—ie, with their jobs—do not, yet. When, in an authoritarian country, swathes of the population are given up to invaders or sacrificed in battle, there isn’t much the victims can do to trouble the commissars. In Britain, there is: they can vote, of course, but also march through London, cripple the country with strikes, even riot.
The moment when hundreds of thousands will fully realise that Mr Osborne’s budget is happening to them, rather than to someone else—as people like to believe for as long as possible—will come in October, when he presents the results of a detailed spending review. The full implications for departmental expenditure will be spelled out. Policemen, social workers, university staff and the unions who represent them (some of whom have already denounced the budget as a declaration of war) will learn just how tightly their services are going to be squeezed.
This imperial fiscal plan will be implemented over a grand time-frame, the hope being that the economy will be booming, and unemployment shrinking, by the time of the next general election. The spending cuts will be brought in over five years, which ministers hope will mean that natural wastage in jobs can account for much of the retrenchment (along with the pay freeze and yet-to-be-determined reforms to public-sector pensions). But the scale is such that many entire programmes and agencies will necessarily be axed. Even natural wastage will have a depressing effect on regions that are overdependent on state employment.
All that in turn will make another aspect of Britain’s political set-up—that it is governed not just by one elected party, but by two—more salient. In the raised income-tax threshold and other budget measures (such as an increase in capital-gains tax) that he championed, Nick Clegg, the deputy prime minister and leader of the Liberal Democrats, can point to policies that help justify his decision to join the coalition. His party’s inclusion in the government enhances its democratic mandate. But the more embittered the public mood becomes, the greater the internal pressure will be on Mr Clegg to extract wider, potentially destabilising concessions from his Conservative partners.
Mr Osborne’s budget was a drastic statement of the executive power of government: the coalition’s imperial moment. “Nudge”, it wasn’t. But the real test of how the imperial approach works in a rainy little democracy is yet to come.
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