Budget 2011: the Chancellor's reputation is built on actions, not the half-truths of spin doctors

We have seen the last two of these ruses over the past week or so in the matter of George Osborne, who today presents his second Budget. One has hardly been able to open a newspaper or magazine in recent days without reading praise, much of it incontinent and incredible, of the Chancellor of the Exchequer. (It is horribly reminiscent of the things that used to be said about Gordon Brown, in the days before he invented economic disaster.) According to the briefings, the following things are true about Mr Osborne. He has a hand in every policy the Government discharges (and that may even be true, or nearly true), particularly the ones that turn out to be successful. He cares nothing for his inevitable unpopularity as a man presiding over ?cuts? ? which, if true, belies the enormous reputation-management exercise being conducted in his name. Finally, and most interestingly, he is now widely regarded as the natural successor to Mr Cameron and, as I read to my surprise in one Leftish-leaning newspaper over the weekend, he is allegedly preferred by many Tories to the Prime Minister on the grounds that he is ?a proper conservative?.

His critics (of whom there are many on his own benches) observe that he may privately understand the toxic effect of high taxes, but dare not act upon that intelligence. As Sir Richard Lambert, late of the CBI, said a few weeks ago, the policy coming out of the Treasury these days contains too much politics and not enough economics. Fundamentally, Mr Osborne has not given Britain?s addiction to statism, fed so intently by the last government, the cold-turkey treatment. That is not an ideological problem, it is a practical one: in a global economy led increasingly by low-overhead economies such as China, India and Brazil, a greedy and unproductive state sector is a route to oblivion.

One should be sceptical of the reputation management undertaken by Mr Osborne?s friends in Whitehall and at Westminster, giving instruction to his lackeys in some parts of the media, because one needs to ask oneself what exactly it was designed to conceal. Why on earth talk about his leadership ambitions at this stage? Unless Mr Cameron falls under the proverbial bus, or contrives to lose the AV referendum, it is hard to see how his position might be imperilled in the short term. So one fears that this has all been a diversion to prevent our seeing the lack of ambition of what may be announced today; when the talking-up begins even before Mr Osborne has stood up, some of us start to think all is not as it should be.

If Mr Osborne does choose to unite the National Insurance system with income tax, as has been briefed, it would be a sensible and honest move: not least since it might intensify the understanding of just how very highly taxed we all are, and how greedy the state has become for our money. There are also signs that Mr Osborne has understood the damage done to Britain when big companies choose to relocate abroad, and that he intends to do something about it. Indeed, from the noises being made by certain companies, one suspects private conversations have already been had in some detail about how life will be made more comfortable for them. Alleviating the suffering of motorists would go down well, and we are told to expect various stunts around the Government?s green policy. None of this, however, adds up to a growth strategy.

It would be admirable if WPP could be coaxed to pay more tax here, and if HSBC could be persuaded not to relocate abroad. But the real engines of growth in our economy are small businesses, and they remain crippled by regulation and the lack of dispatch with which the Government is addressing that problem. Tory politicians speak of the Lib Dems sitting on the Conservative Party?s shoulders, and particularly of the ineffectiveness of Vince Cable, the Business Secretary, whose retention in office appears to be compulsory whatever his levels of ineptitude. One chairman of a small firm told me how put-upon his management is by receiving demands from the Government to fill in forms about the firm?s diversity policy. How is this relevant to the urgent matter of growth? Also, does the Government realise the lack of incentive to successful small businessmen of forcing them to pay a marginal tax rate of 62 per cent? Enterprise zones, also hinted at, would help: but the medicine may have to be made more widely available.

The last government decided that the welfare state would include not just claimants, but also salaried staff. It embraces central government, local government, quangos and great state institutions such as the National Health Service. It seems that some of these exist to create largely unproductive employment rather than to serve the public. Perhaps the scope of what is required overwhelms Mr Osborne. Perhaps it would overwhelm anybody. The growth strategy we need requires a complete restructuring of our economy. It means dismantling large parts of the state apparatus and transferring resources to the private sector, where they would generate better value and enhance competitiveness. It also means seeking self-funding tax cuts (such as the end of the 50 pence rate) to stimulate the economy and create greater prosperity by increasing the level of disposable income ? and to do these things even if it means a few bankers becoming richer.

The Chancellor?s forecasts for the year ahead will be interesting. Inflation, at 4.4 per cent yesterday, must mean interest rates will rise. Unemployment is headed upwards. We remain handicapped by a weak currency, given our dependence on imports. The Conservative majority in our Government remains blighted by the socialistic prejudices of the Lib Dem minority, upon whom it must rely for its continuation in office. The deficit may be �10?billion lower than expected, but it is still ugly. Room for manoeuvre can be obtained only by daring, rather as it was when the Thatcher government cut direct taxes dramatically a few weeks after her election in 1979. Radicalism is always defensible provided the government engaging in it has time to see the beneficial results before it seeks re?election. Whatever the reputation managers say, today is Mr Osborne?s last chance.

finance news investing news markets market news news