It is an exciting day for Liberty Osborne, the Chancellor’s daughter, to join him at work. The windows at HM Treasury are boarded up, workmen line the road replacing the bombproof (but not student-proof) glass. Graffiti defaces the walls, but although several politicians are named and shamed in spray paint (‘Why did Nick Clegg cross the road? Because he’d promised not to’) there is nothing unkind about the author of the cuts: George Osborne himself.
When we meet the Chancellor at 10.30 a.m. in 11 Downing St, he does not look the slightest bit like a man under siege. Seven-year-old Liberty bounds out of his study, waving at us cheerfully. The Chancellor is no less upbeat. As we sit down in what was, for nine years, Gordon Brown’s study, he points to the various improvements he’s made. ‘This door was kept locked for all the time Brown was here,’ he says, pointing to the door adjoining No. 10. ‘They paid someone to police the corridor, just to make the point that this was Brown’s territory, and people couldn’t just march through.’ It is now a free passage. All one happy family, albeit a family with more members than the Tories originally planned.
For five years, Osborne was number two to David Cameron — ‘the second longest-serving shadow chancellor in history’, he says. Now, Nick Clegg is number two — and the focus of the protesters’ wrath. Is he surprised it is the Lib Dems who have taken the brunt of the hatred? Osborne says he has ‘sympathy’ for the Lib Dems because the Tories, too, once had to drop their opposition to tuition fee increases — ‘pretty much the first thing we did’ under David Cameron. ‘We had learned that there is no shortcut to power. If you lose your intellectual integrity, it is a long road back.’
So what does this say about the intellectual integrity of his coalition partners? He doesn’t elaborate, instead praising Mr Clegg for his ‘courageous’ support. And does he share Sir John Major’s wish that the coalition should last for ten years? ‘At the next election, I expect to be campaigning for a single-party Conservative government. I will expect there to be two manifestos: one Conservative and one Liberal Democrat.’ No one had suggested a joint manifesto, but that he rejects the notion underlines the doubt about the next election.
Mr Osborne was made shadow chancellor by Michael Howard at the age of 34, and urged to run for leader. Instead, he supported his friend David Cameron’s bid and the two have — in effect — shared power ever since. Coalition ended his plans to work from No. 11 rather than the Treasury, but he says he is no less close to the PM. ‘I begin the day at the Prime Minister’s morning meeting, and see him again at his 4 p.m. meeting. I can’t think of any time in recent history where the Chancellor was invited to attend the PM’s two daily meetings with his staff — and chair the meeting in the PM’s absence. You can’t imagine Brown allowing Darling to chair his meeting.’
Indeed not. But this is, in part, because Alistair Darling regarded himself as the numbers man. Both Cameron and Osborne clearly take a broader view of the Chancellor’s role. When asked what the best part of the job is, he responds unhesitatingly: ‘It is an excuse to poke your nose into everything government does.’ But isn’t that precisely Brown’s mistake? ‘With the possible exception of some areas of foreign policy, a lot of issues come down to money and budgets, so it is a fantastically interesting job.’
But even in foreign policy, he says, there is a role for the Chancellor. ‘I don’t think I’d appreciated quite how much of the Chancellor’s time is involved in international diplomacy,’ he says. ‘Alongside the Foreign Secretary and the Prime Minister, the Chancellor these days does a lot of Britain’s diplomacy and relations. It is the Chancellor who does the G20, with the Prime Minister. I found all that much more interesting and challenging than I had anticipated.’
The number one foreign policy matter for the Chancellor is the travails of the eurozone. He feels, justifiably, a sense of accomplishment in that Britain — which still has the largest deficits in the Western world — is not being pulled into the maelstrom. His five-year plan to cut the deficit by 85 per cent has reassured the markets, lowered the cost of borrowing — and, he says, set an example. Britain, he says, shows nation states that they are ‘not just a victim of the markets, not passive observers in the fate of your economy. You can take control, you can earn credibility, you can move yourself out of the financial danger zone.’ The implicit message to other European government is clear: get on with it.
And if they don’t, they shouldn’t count on Britain helping to bail them out. Osborne says he is pulling Britain out of the euro-zone bailout mechanism and ‘decided to go for Ireland only’, rather than European countries in general, when drawing up legislation allowing emergency loans.
For Osborne, of course, everything is political. He has already started to work out how to turn the coalition’s silent success into campaign slogans for the 2015 election. ‘The message will be quite straightforward: that Labour wrecked the British economy, we fixed it — don’t let Labour wreck it again.’ We broach the touchy subject of why the Conservatives failed to win last time around, given the auspicious electoral conditions. There was a victory, but it left David Cameron with a lower share of the vote than any previous Tory PM. Osborne co-ordinated the last election campaign, and has so far said little about it.
He is clear on what was not at fault: ‘I disagree with some of the Conservative critics who say we weren’t Conservative enough,’ he says. The party failed to win enough votes from Scots, public sector workers and ethnic minorities. The remedy, he says, is ‘to press further on the modernisation pedal of the Conservative party and not to retreat to the old Tory comfort zone’. The Conservatives must ‘constantly demonstrate that we are for the entire country, all sections of the population’. He says he agrees with Lord Ashcroft’s analysis: that the Tory brand had not been sufficiently decontaminated.
So what might this mean politically? He defends the 50p tax on the richest, saying it contributes to ‘a sense of fairness’ and makes the cuts more palatable in general. But it will be temporary. Not so the rise in VAT, which was 15 per cent last Christmas, is 17.5 per cent now and will be 20 per cent next month. ‘The VAT rise is not temporary. It can’t be. We are talking about a totally different scale of revenue and the VAT rise is a structural change to the tax system to deal with a structural deficit.’ The only tax he speaks of lowering is corporation tax.
While in favour of lower taxes in principle, he does not speak of them as a means of creating jobs or raising revenue, as his counterparts do in places like Singapore and Sweden. He describes a choice between tax cuts and ‘sound money’ and says it has been a point of internal Tory debate. ‘David Cameron and I for many, many years had this argument with the Conservative party, I remember the party conference in 2006 making precisely this point, that sound money was the route to lower taxes — and this was before the crash. So I am absolutely a proper fiscal Conservative and I will take on the Fraser Nelsons of this world!’
What can he mean? Well, Osborne has a very specific enemy: those who want what he calls & #8216;unfunded tax cuts’ — that is, lower taxes but not lower spending. It is a neat analysis, with only one problem: no one in Britain has been advocating ‘unfunded’ tax cuts. The Spectator has long argued for tax relief funded by spending cuts, pushing back on the unprecedented increase in state spending under Labour.
Of course Osborne has other cards up his sleeve. Barack Obama’s administration has just made $12 billion selling its stake in Citigroup, and the British taxpayers are not-so-proud owners of several recovering banks. So when assets are sold, might there be some money for tax relief? ‘I don’t have a blanket rule that all asset disposal proceeds have to be used to reduce debt,’ he says. But he mentions government spending projects as an alternative to cutting taxes: transport, energy infrastructure and other ‘earmarked projects’.
Britain’s banks are, anyway, still worth less than what the taxpayer paid for them. But when the time comes to sell, a ‘Tell Sid’-style disposal programme is something he’s ‘interested in looking at’.
In a small frame on his desk, he has a reminder of economic failure: a fake trillion-dollar note from the Bank of Zimbabwe. Opposite, he has put up portraits of Gladstone and Disraeli. The latter, he says, would probably have been more fun to have a drink with. Osborne has made history in being the youngest Chancellor in more than a century — but, at the age of 39, is he really holding his last job in government? ‘I can’t answer that,’ he laughs. ‘Who knows what the future holds?’
While Darling said that being Chancellor in a recession was so stressful that it almost ‘made my eyebrows turn grey’, Osborne gives every impression of thoroughly enjoying it. He expected to be hated: instead he is being praised for restoring confidence in the British economy. ‘I’m very happy getting on with my job,’ he says. ‘And not being burnt in effigy. Just yet.’