Osborne must get his story straight to win the tax credit battle

With his lack of coherence, Osborne is fortunate that he is facing a Labour Party that both supports and opposes Trident

George Osborne says Britain must not 'lose its nerve' on spending cuts (Getty)

George Osborne is one of the few politicians who recognises that he needs to be a storyteller in order to get things done. In opposition and in government, his hyperactivity has always been framed by a narrative. Osborne’s stories have included the one about the previous Labour government being responsible for the global economic crash and the UK economy being as fragile as Greece. He also used the tale of an individual “maxing out on a credit card” to prove that a nation must balance its books speedily.

I do not make the observation about the Chancellor’s storytelling skills pejoratively. On the whole, post Blair/Brown, Labour politicians have been hopeless at explaining why they act in a particular way – their disparate policies appearing from nowhere without a compelling theme. As for the current Labour Party, where a leader makes one argument and his shadow cabinet members make the opposite, there can be no making sense of that.

But in the weeks that have followed the Conservative conference, the Chancellor has also struggled to make sense of his stories. Actual policies have intervened. His plan to cut the working tax credit was doomed well before its defeat in the Lords; indeed, the defeat has become a convenient excuse. Now he can blame the non-elected upper house when he would have made changes anyway after The Sun, The Spectator and a significant section of his parliamentary party had declared their opposition to his plans.

As Osborne admitted in his interview with Charles Moore, he and David Cameron are avid followers of the media. They know that the removal of the working tax credits had all the ingredients of a news story that would keep on giving: front page news on the day the letters were sent out advising of the loss of income, the lead on BBC Radio 4’s Today programme on the day the letters arrived, the human stories of hardship to follow, etc.

All of which makes it even more suprising that Osborne has been outflanked by the welfare secretary, Iain Duncan Smith, and his entourage, who have been busy narrating a story of their own. Duncan Smith’s narrative goes like this: The Chancellor is dangerously preoccupied with targeting the poor and the working poor. Now that he cannot save billions from the working tax credit, he seeks cuts in the universal credit. If Osborne goes ahead, Duncan Smith will resign.

That may sound powerful, but Duncan Smith was another fooled by the budget, famously punching his hands in the air when Osborne announced what appeared to be a masterstroke – a “living wage” that was still a pay cut for working poor.

Negotiations over the Autumn Statement are at their peak so this alternative narrative is all part of the political poker game. Nonetheless, I have no doubt that Duncan Smith is genuinely furious – and has good cause to be. The internal tensions did not begin with the Budget or during the panic-stricken general election campaign, when Cameron and Osborne made a range of ill thought through pledges. They actually go back to January 2014, when Osborne made a speech in which he announced there would be a further £20bn of cuts required after the election, of which £12bn would come from the welfare budget.

Duncan Smith had no idea Osborne was making the speech, let alone that such an axe was being buried into his department. The Chancellor did not specify precisely what cuts would be made, partly because he did not know. The speech was made to begin the long, deranged “tax and spend” game played before each general election. But he also meant it. Now Osborne has re-emerged with his broad argument – one he knows is popular with voters and much of the media – that the UK must “balance its books”.

In a speech yesterday (much revised during the weekend, as Duncan Smith and other dissenting cabinet ministers seemed to have soared ahead in the battle of the “spending round narrative”), Osborne added that four departments had already agreed to spending cuts. He included the Treasury, which was cheating; it would be something of a surprise if Osborne’s own department were leading the charge against his planned cuts. That number also includes the department responsible for local government. But settling on a sum for them is the easy bit – as it is local government itself that will have to decide precisely where the axe will fall. As for those that have not settled yet, they are fighting honourable battles. Osborne may genuinely believe that services can be improved with sweeping cuts, but he has never served in a “spending” department. If he had been a Home Secretary or a Defence Secretary he may not be so sure.

Osborne will almost certainly find some of the missing cash from higher than anticipated tax receipts – not an unusual bonus for a Chancellor. As the economy is growing, spending levels are not especially reckless. They only became unsustainably high following the deep recession of 2008, when spending had been planned on the assumption of modest growth.

What the UK needs, and never gets, is a grown-up debate about the levels of services and infrastructure it needs and how such ambition might be realised. Instead, we suffer from the dishonest pre-election “tax and spend” dance between the parties and now a Chancellor with two conflicting narratives – one about his ambition to be a great builder, the other about his plans to cut more deeply than even Thatcher dared to contemplate, so deep that a former party leader threatens to resign. In his resolute incoherence, Osborne is fortunate that he is facing a Labour Party that both supports and opposes the renewal of Trident. None of the narratives whirling around UK politics make much sense. They would challenge the storytelling skills of the most titanic political artists.