Where’s Osborne?

On holiday in Tuscany. His decision to fly by EasyJet last week, eschewing even priority boarding, strikes notable tones of austerity. This is in sharp contrast to his time spent on a Russian oligarch’s yacht in the summer of 2008. However, just as the visit to Oleg Deripaska’s boat was part of an attempt to secure a £50,000 donation for the Conservatives, this year’s low-profile Italian trip seems to have political motives.

His absence, coinciding with Cameron’s, has propelled Nick Clegg and Danny Alexander into the spotlight during a week of difficult announcements for the government. Liberal Democrats are taking the rap for Tory decisions.

The eve of the holiday was marked by ‘titanic’ rows at a Cabinet away-day between the Chancellor and work and pensions secretary, Iain Duncan Smith. Duncan Smith was said to have twice threatened to resign over proposed cuts to his welfare budget.

Relations with defence secretary Liam Fox have also been strained of late, due to disagreements over the funding of Trident. Osborne’s holiday has been well timed to defuse these tensions.

Then came last week’s damning report from the Institute for Fiscal Studies, which seriously undermined the Chancellor’s earlier claims that the Budget was progressive. Clegg, thrust into the frontline, has been forced to backtrack on his previously voiced veneration of the IFS, and Osborne has so far managed to avoid having to defend his own budget.

Last Friday, Bloomberg gave Ed Balls a chance to respond to the Chancellor’s defence of his budget in a speech given to the news company ten days before. Balls stressed that deficit reduction will not increase consumer confidence, and the historical record of the 1930s and 1980s shows that fiscal retrenchment is likely to bring about economic stagnation.

Here’s an excerpt:

“Even in the days since the [Osborne] Bloomberg speech, we have seen increasing signs of economic slowdown in Britain, and UK consumer confidence, business optimism and mortgage starts are all down.

For all George Osborne’s talk of ‘deficit-deniers’ – where is the real denial in British politics at the moment?

We have a Chancellor who believes that he can slash public spending, raise VAT and cut benefits – he can take billions out of the economy and billions more out of people’s pockets, he can directly cut thousands of public sector jobs and private sector contracts, and none of this will have any impact on unemployment or growth.

Against all the evidence, both contemporary and historical, he argues the private sector will somehow rush to fill the void left by government and consumer spending, and become the driver of jobs and growth.”

Osborne’s response? Sweet nothing.

Next came Danny Alexander’s announcement, in an interview with the Observer, that taxes were unlikely to fall over the course of the Coalition government. The Chancellor’s absence appears to have been especially tactful here, as the news is expected to infuriate the Tory right. As David Blackburn on Spectator blog CoffeeHouse points out, this potentially raises difficult electoral problems for the government:

“The squeezed middle classes pose more of a problem for the coalition. Their benefits and tax credits will be cut, tax on their consumption is rising, tax on the gains of their long-term investments has risen and may rise again and there is to be no relief on their income tax.”

Several contentious cuts have also been announced. The replacement of NHS Direct with a lower-budget and lower-quality alternative comes dangerously close to impacting upon the supposedly ring-fenced health budget. Ed Balls’ playground-building scheme has also been named a victim of the cuts this week: 400 planned facilities are to be dropped.

Osborne’s name has actually re-entered the news today, with the leaked announcement that he is to slash Treasury staff numbers by 25% over the next four years. Once more, however, the Chancellor seems unavailable for comment.