EVENTS OF THE past two weeks have conspired in favour of George Osborne. The Barclays LIBOR scandal, the G4S Olympic Games security debacle - even the weather - have combined to draw attention away from David Cameron’s growing problem: what to do with the chancellor.
I suspect that this may prove a brief respite. By the party conference season this autumn the question of the Osborne chancellorship will be one of the biggest talking points. Should he be replaced? And, if so, by whom?
By any historical comparison, George Osborne has had to contend with a horrendous combination of a massive debt inheritance, a broken banking system, a colossal sovereign debt crisis in the Euro zone, a slowing world economy – and a coalition only held together by the realisation that without a commitment to cutting the budget deficit, the UK’s sovereign credit rating would be torn apart by the markets.
Notwithstanding this year’s unravelling budget of blunders and errors, Mr Osborne’s chancellorship has far from been a failure. He has brought about a reduction in the budget deficit. He has brought in much needed micro measures to help the small and medium sized enterprise sector. And he has preserved for now the UK’s Triple A credit rating. Given the circumstances – and the UK’s relapse into a double dip recession – it is about the best that could have been hoped for given the destructive power of force majeure.
So why change the chancellor now – and with the attendant risk of handing a propaganda victory to shadow chancellor Ed Balls?
The problem for David Cameron is that when it comes to bringing the public finances back under control the fractious coalition as failed to learn the lesson of history. Painful measures have to be quickly implemented and pushed through to their conclusion before opposition has a chance to organise. And the chancellor who oversees such a programme must be able to command broad support and sympathy in the Commons and in the country.
Public patience with austerity periods is short. Welfare politics of the type in which we are steeped cannot long stomach them. And the more that government has become the single biggest employer the more organised and entrenched the opposition has become.
Yet we are barely half way through its parliamentary term and by far the greater part of the planned reductions in public spending still lie ahead. Indeed, it would not be much of an exaggeration to say that the Osborne “austerity” budgets thus far have been nothing of the sort. The fact is that public expenditure has continued to rise, and with it Public Sector Net Debt, though the public would struggle to appreciate this reality given the relentless portrayal by the BBC of a country being laid waste by Draconian public spending reductions.
Combine this with an economy set (at best) to bounce along the bottom for the next two years and the likely loss of our triple A rating and it is debatable whether Mr Osborne can long survive before his authority and ability to influence events is lost in the growing outcry. Even if he is able to withstand the baying assaults of the Labour opposition, events themselves will demand a change.
Economic circumstances have deteriorated markedly since May 2010. And all major forecasting groups including the IMF have sharply reduced their growth estimates for the UK economy for this year and next. Mr Osborne may have been right for the first half of this parliament? Is he still right for the second?
Mr Cameron could keep things simple by swapping Mr Osborne with William Hague, the Foreign Secretary. The switch would have compelling advantages. It would bring an experienced, authoritative – and relatively popular – figure to Number 11 Downing Street. There would be little doubt as to Mr Hague’s competence, even though the problems he would face would be daunting for any candidate. Mr Hague has none of the aura of privileged background which has made it difficult for Mr Osborne to convey the sense of shared burden with conviction. He is a powerful performer in the House of Commons. And he has that gift that is so often under-estimated in politics – a sense of humour. Mr Hague may be exactly the appointment needed to puncture the pomposity of Mr. Balls.
For many the natural choice would still be Vince Cable. He certainly has the persona to be an austerity chancellor and his appointment would raise the chances of prolonging the coalition. Conservative backbenchers would despair, of course. But we are now entering the most difficult period for the country and for this government. Keep the present chancellor in office too long – and all three may end up casualties.