George Osborne deserved the sack. But not for defending the EU

For, I trust, understandable reasons, this column has been so preoccupied with the demons released by the referendum that we have not taken time to refer to the departure from the government of one George Osborne.

His summary dismissal was long overdue, but it took a new prime minister – memorably described by one of Osborne’s predecessors, Kenneth Clarke, as “a bloody difficult woman” – to do the deed.

When one contemplates all the occasions on which Osborne’s ill-conceived economic strategy merited his dismissal, it is strange that a worthy cause he so passionately fought for – namely that we should remain in the European Union – should, when it failed, have been the occasion for his political demise.

But, as both prime minister Theresa May and her chosen chancellor, Philip Hammond, have hinted, the two – Osborne’s austerity programme and the result of the referendum – are not entirely unconnected. May, in particular, has made pointed references to the way savage cuts to local authority budgets undoubtedly, and understandably, contributed to the dissatisfaction and sense of alienation that led to such a large protest vote in northern England.

There is also a sense in which Osborne, while being on what I regarded as the right side during the referendum campaign, in fact contributed to the disastrous result.

The Leave campaign’s propaganda was stuffed with falsehoods, and the Remain campaign was distressingly feeble. But Osborne’s contribution to the latter – precise figures for hits to the standard of living in 2030; laughable threats of an emergency budget – was beyond parody, and seen as such by the general public. As for his warning that house prices might fall after a No vote, this made him a laughing stock among all those people who were already priced out of the property market. At the very least, the former chancellor’s contribution to the campaign did not help.

It was common knowledge in Westminster and Whitehall that Messrs Cameron and Osborne shared what is now known to be Kenneth Clarke’s view of Theresa May. So, what with personal antipathy added to differences over economic policy and its impact, the humiliation of Osborne was no great surprise.

It is, though, I suppose, to Osborne’s credit that, while his chancellorial career was being summarily brought to an end, the man he had gone to such lengths to recruit as governor of the Bank of England, Mark Carney, was generally perceived to be playing a blinder in propping up the financial system at a time of genuine crisis.

What with his early misadventures with “forward” – and what I termed “backward” – guidance on interest rates, Carney became the object of much derisive laughter in the City. And last month he was at it again, evidently flummoxing that army of highly paid analysts who spend so much time forecasting the course of interest rates, with what one might term “premature” guidance.

Under Carney, the Bank handled the threat from the referendum commendably well. But when it comes to stimulating the economy, as opposed to saving the system, it is now widely recognised that central banks are close to the limits of their powers.

Enter, or re-enter, fiscal policy – the scope for governments to reduce taxes or increase public spending, or both, in order to get the economy moving towards its full potential. And, in the case of an economy that is still suffering from the aftershock of the financial crisis, and may now have to face a structural hit from this Brexit folly, we ought to be thinking of fiscal policy combining with the much-talked-about revival of industrial strategy.

Both the prime minister and her chancellor have been described as “fiscal hawks”, but the indications about the possibility of “resetting” fiscal policy in the autumn are welcome, and appear to be sincere.

Moreover, given the prime minister’s recognition of the neglect of large sections of society that contributed to the EU referendum vote, one trusts that they will also be looking at the kind of regional policies that the Attlee government employed with considerable success after the second world war.

Since the Labour party has gone outside and may be some time, the nation must hope that May means what she says about a return to one-nation policies – unlike Osborne’s savage cuts to local authority spending, which aggravated the social distress of those who feel victimised by globalisation and react against advice from an elite that has prospered from it.

But these are early days, and I am not entirely convinced. The new team at Nos 10 and 11 may have abandoned Osborne’s damaging and economically unnecessary plan for a budget surplus – on current and capital spending by the end of the decade – but there are still a lot of cuts in the pipeline.

Meanwhile people should not forget the gap between Mrs Thatcher’s speech about “harmony” on the steps of 10 Downing Street and what actually followed. Oh, and by the way: as I have pointed out before, that prayer was wrongly attributed to St Francis and was in fact written by a French priest during the first world war.

Powered by article was written by William Keegan, for The Observer on Sunday 7th August 2016 07.00 Europe/London © Guardian News and Media Limited 2010