The Christmas Special of The Spectator is out today, and George Osborne kindly agreed to
an interview. We have printed 1,500 words in the magazine, but James and I thought CoffeeHousers may like a fuller version, where he has more space to speak for himself. We have gone into way
more detail on tax policy here than in the magazine, for example, as Osborne is seldom pressed on this point and his thoughts are very interesting. We have divided it up by subject headings, so
CoffeeHousers can skip the chunks they’re not interested in.
Liberty, paternity and Treasury
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
quite student-proof) glass. Graffiti defaces the walls, but although several politicians are named and shamed in spray paint but there is nothing unkind about the author of the cuts: George Osborne
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. Her
father 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.
The Lib Dems and the tuition fees pickle
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? “I have some sympathy for the political situation that they found themselves
in,” he says. “Actually the Conservative party got itself into exactly the same situation in 2004. It opposed top up fees. There is a striking symmetry here – parties in opposition
oppose top up fees and student fees, while and parties in government support them. That is because it’s very easy in opposition to mistake opportunism for opportunity.”
But the Tories, he said, decided not to do so under David Cameron’s leadership. “Pretty much the first thing we did was ditch our student fees opposition.” The new generation of
Tories, he says, “learnt a lot from the 2004 opposition to student fees – which is that there is no shortcut to power. And if you lose your intellectual integrity then it is a long road
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.” To say one ‘expects’ falls a little short of saying that one definitely will. No one had suggested a joint
manifesto, but that he rejects the notion underlines the doubt about who fights whom next election.
Osborne’s day and his role
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 (as Nigel Lawson did), 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 – not a position to deputise for the PM. 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 what the other guy did wrong? “With the possible exception of some areas of foreign policy, in the end a lot of issues come down to money and budgets so it is a fantastically interesting
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 travails of the Eurozone
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 need to press further on the modernisation pedal”
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. “I think we were pretty Conservative in making the argument about a bigger role for society, the need to cut
public spending and the like.”
So what went wrong? “If you look at the seats where we didn’t cross the line, it was partly in Scotland. It’s difficult to win big General Elections when you are not winning seats
in Scotland, frankly. But second, the seats that where we didn’t cross the line on tended to be urban seats with either large numbers of public sector workers, people in public housing, large
ethnic minority groups.”
His conclusion? “What you need to deal with that problem – and make the Conservative party more attractive to those voters – is to press further the foot on the modernisation pedal of the
Conservative party and not to retreat to the old Tory comfort zone.” The Tories, he says, must “constantly demonstrate that we are a party for the entire country, for all sections of
Taxation: the 50p and VAT
It’s a fairly safe bet that this thinking will underlie what Osborne does in office. It is not hard to detect the political points which underlie his policies as Chancellor – but this also
has implications for the British tax regime. He wants Britain to be competitive, with low corporation tax, but doesn’t the 50p tax send out a different message? That Britain wishes to take a
carving knife to any golden geese who may be tempted enough to fly here? “I didn’t introduce the 50p tax,” he says. “I’ll make it again clear, this is a temporary
feature of our tax system. I am not someone who believes that high marginal tax rates are good for an economy. I don’t think – in the long run – they encourage enterprise and investment so it is a
temporary feature of our tax system. But, obviously, I have another consideration: making sure that the whole country feels that every part of society is making a contribution to the fiscal
consolidation. Trying to keep that sense of fairness.”
But the VAT rise – it’s going up to 20 per cent on New Year’s Day – is here to stay. “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 – and, on this, he is emphatic. “Show me a country in the world with our sort of fiscal challenge that is prepared to take the
difficult political decision to cut the corporate tax rate from 28 per cent down to 24 per cent over four years, giving us the lowest corporate tax rate in the G7, the fifth lowest in the G20, the
lowest of any major western economy. I think we’ve put our money where our mouth is. It would have been the easiest thing to say, ‘businesses don’t vote, let’s put the taxes
up on them, no one’s going to notice’. We have done the exact reverse of that.”
Yet when Mr Osborne talks about lowering tax, he seldom does so by arguing that this will create jobs – or even raise revenue. In this, he is hardly alone amongst world finance ministers. But it
also sets him apart from those who regularly talk about low tax as the surest route to more jobs, and more revenue. The Swedish conservatives won re-election by saying that lower income taxes will
mean lower dole bills, because people have a greater incentive to work. Singapore is the latest country to discuss lowering the top rate of tax, in order to extract more money from more rich
people. But Osborne talks in different terms.
The Osborne view on tax, and tax cuts
Asked if he regards Britain as an over-taxed country, he hesitates: “That’s a good question. I would like to reduce taxes – so, in that sense, it would be good if we could bring taxes
down. But I’ve always believed the only way to do that is to have sound public finances. I am a fiscal Conservative, I’m not a Reaganite deficit-funded tax cutter. I am actually in that
sense more the model that Margaret Thatcher and Nigel Lawson pursued. That means sorting out the public finances – and if there is a surplus, then use that to reduce taxes. That’s what he did
in the late 80s.”
But by the Treasury’s analysis, there will not be a surplus in this parliament. Does that mean no tax cuts either? “Look, as I say, once we can bring some stability to the public
finances, we can look at reducing the tax burden on people. But it is a complete mirage to cut taxes one year, then have to borrow the money and put up the taxes later to have to pay for that
borrowing. 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. I had the argument during the
recession when I opposed the VAT reduction because I felt it was being paid for by higher borrowing and the real concern facing the country at the time was ever higher borrowing and deficit levels
that were bringing into doubt the credibility of the country’s economic policy. So I am absolutely a proper fiscal Conservative and I will take on the Fraser Nelson’s of this
What can he mean? Well, Osborne has a very specific enemy: those who want what he calls “unfunded tax cuts” – that is, lower taxes but not lower spending. The people to whom he refers
as Reaganites. 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.
When the banks are flogged, will he tell Sid – or Vince?
It is odd to think that Osborne would go into an election without a tax cut offer. And he does, of course, have 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 the money from all the asset disposals has to be used to reduce debt,” he
says. “For example some of the proceeds from the high speed rail sale goes into the transport budget to be invested in new transport infrastructure. Equally some of the money from future
asset sales that I’ve just been talking about are obviously going to the Green Investment Bank which is going to invest in new energy infrastructure. So there are some earmarked projects –
but obviously they have a very high bar . You must be convinced they are value for money if you are not going to use the money you’d use from the sales for debt reduction.”
As he says, it’s a little early to be speaking about divvying up a bank windfall because Britain’s state-owned banks are 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”. When reminded that Vince Cable was, before the election,
dismissive about the idea before the election, Osborne smiles. “Well,” he says, “the Business Secretary and I have many discussions.”
Is Chancellor Osborne’s last job in politics?
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?”
His aides are pointing to the time (we’re hitting the buffers of the allocated 45 minutes) but the Chancellor looks in no rush – so we try a few more rapid-fire questions. There are no five
men from Magdalen College, Oxford, in his Cabinet. Is that enough? He laughs. “There are five Magdalen men in Cabinet, is that enough? It is only a matter of time before Dr Rupert Harrison,
ex-Magdalen, joins us!” he looks over at his chief economic adviser, the 31-year-old Harrison (who chose not to join his colleague Matthew Hancock in the rush for Tory safe seats a year ago,
and smiles politely as if an doting Aunt had just predicted he’d be president). “At least in parliament, maybe.”
Can he say anything about the CD collection which apparently Eric Clapton was so taken by? “I think this story is a little bit overblown,” he says. Well, what is he listening to now?
“I have a really good new album by Rumer,” he says – a newish Pakistani-British singer-soungwriter being compared to Karen Carpenter. “She’s got a brilliant sound,
I’ve just got it on my iPod.”
Does he believe in the Virgin Birth? “I am a good Church of England man. With all the scepticism implied by that.” And where is he spending Christmas? “I’m not sure
I’m going to tell you! With my wife’s family and my family.”
Given that David Cameron has cancelled a trip to Thailand, we ask if Osborne thinks there are places in the world that he can’t go. “I don’t think I’m grounded in the
country. In the end of course I’m conscious that people, through the media, will pore over my private life and what I do with my family and so on. But in the end I have got to be
judged, I certainly will judge myself on the policies that I put forward. Actually I’ve discovered in this job for the last six months that that’s really what you are judged on and not
the colour of the tie you are wearing that day or your haircut.”
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.”
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