Conservatives and Labour fail to persuade voters with conjured up cash

Inside Westminster: George Osborne's Budget shuffled money around between years to conjure an improbable surplus

British Finance Minister George Osborne poses for pictures with the Budget Box as he leaves 11 Downing Street (AFP/Getty)

In the week in which Paul Daniels died, the two main political parties tried to fool the voters with some magic of their own. But it was amateur hour at Westminster. In his Budget, George Osborne shuffled money around between financial years to conjure up an improbable budget surplus by the 2020 election. Why? He has already missed two of his three fiscal targets and so must hit the big one – a pre-election surplus.

The need for some trickery persuaded the Chancellor to pencil in £4.4bn of cuts to disability benefits. Until now, he and David Cameron have mainly focused such welfare savings on encouraging the sick back to work. But cutting personal independence payments (PIPs) is hardly “Compassionate Conservatism”. Osborne will surely learn from his painful, protracted U-turn on tax credit cuts and beat a swift retreat on PIPs.

The Chancellor might yet have to be flexible about his planned budget surplus. He has form. He was supposed to clear the deficit between 2010 and 2015 but halved it. Vote Osborne, get Darling – the Labour Chancellor whose plan was to eliminate half of the deficit by 2015. Will the story of this parliament be vote Osborne, get Balls? The then shadow Chancellor promised at last year’s election to clear the deficit on day-to-day spending, while borrowing to invest in infrastructure projects.

Or should I say vote Osborne, get McDonnell? John McDonnell, the shadow Chancellor, has announced a “fiscal credibility rule” that is remarkably similar to Ed Balls’s policy. At first glance, balancing the books on current spending and reducing government debt over a five-year parliament looked like a welcome dose of realism from Labour. After six months as leader, it appeared Jeremy Corbyn was finally turning his mind from winning control of the party to winning votes in the country.

But after the Budget, McDonnell spoilt it all by saying something stupid like: “To balance the budget, there’s no need for cuts.” He argued that the deficit could be cleared by efficiency savings, a crackdown on tax avoidance and economic growth – a “motherhood and apple pie” approach based on things Osborne can claim he is already doing.

Implying that the deficit can be waved away with a magic wand without any cuts will surely not bamboozle the voters. Before the 2010 election, Gordon Brown had to be strong-armed by aides into using the “C-word” – cuts, that is. The voters sensed it, and he lost. Balls promised some limited cuts last year. Labour lost again.

McDonnell insists that austerity is a political choice, not an economic one. Of course, it would risk alienating many of the Labour members who voted for Corbyn because of his anti-austerity ticket to start talking about cuts. To them, it would look “Tory-lite” or “Red Tory”, the labels that Corbynistas pinned on his rivals for the leadership. But to fight back in the country, Labour’s new leadership is going to have to get real. It hopes that voters are tiring of austerity. But that could prove wishful thinking: a YouGov survey showed that 44 per cent of people still think cuts are necessary, while 33 per cent think them unnecessary.

The Corbyn-McDonnell pitch to balance the books in a fair way has been made more attractive by Osborne’s unforced error on disability benefits. But this controversy will probably be forgotten by 2020. The next election could be very similar to the last one – especially if more austerity looms in the next parliament, as now looks likely.

A global recession on the Tories’ watch could certainly dent their economic credentials. So might the economic turmoil that could follow a vote to leave the EU in June. But Labour should not underestimate the public’s tendency to “hold on to nurse for fear of something worse”. Voters will not flock to Labour unless it passes the credibility test.

Peter Kellner, YouGov’s president, believes McDonnell’s new rule will not solve Labour’s deeper problem. He said: “Voters, and especially floating voters, judge parties and politicians in ‘valency’ terms – competence, toughness, honesty, whether they understand the real world and ‘the lives of people like me’. This is where Ed Miliband fell down, and Jeremy Corbyn and John McDonnell suffer even more.”

The Labour leadership is under internal pressure to go further. Spencer Livermore, a Labour peer who was its 2015 election campaign director, told the modernisers’ think-tank Progress that the party is not learning the lessons of its defeat. “Announcing a policy that lacked credibility then is not going to give us credibility now,” he said. Chris Leslie, the former shadow Chancellor who chairs Labour’s backbench Treasury committee, said the leadership must spell out “difficult choices”. He said: “It is not enough to merely rail against Tory failure. The public want an alternative administration they can trust to make mature decisions, confront realities and have fairer values when making spending priorities. This is the challenge Labour must confront.”

The debate is hotting up. McDonnell accused Leslie of talking “nonsense”. His spokesman said: “John obviously recognises tough decisions need to be made, which is why he has said that we would adopt zero-based budgets when we come back to power. And we will lay out our spending decisions before we return to government.”

Despite that promise, both the Conservatives and Labour end the week with a credibility gap. As Tim Farron, the Liberal Democrat leader, told me: “The Chancellor has created yet another omnishambles Budget and the supposed Opposition is hoping that by magic tricks and printing money they can make themselves seem credible. They are as bad as each other.”