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Osborne Makes Pitch to Be U.K.'s Next Prime Minister

Mark Gilbert is a Bloomberg View columnist and writes editorials on economics, finance and politics. He was London bureau chief for Bloomberg News and is the author of “Complicit: How Greed and Collusion Made the Credit Crisis Unstoppable.”
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All national budgets are as political as they are economic. But the spending plans delivered on Wednesday by U.K. Chancellor of the Exchequer George Osborne are an exemplar of Machiavellianism, from a politician determined to get to what Benjamin Disraeli called "the top of the greasy pole."

Every Osborne appearance in the next few years forms part of the interview process in his application for the top job in Parliament. David Cameron has already said he won't stand as Conservative Party leader in the next election; once the European Union referendum is over, he's likely to ride into a lucrative sunset. That will open the role of prime minister to whichever Tory can muster the ruling party's backing.

Osborne is the current favorite to succeed Cameron, according to the bookmakers. But he lacks the charisma of London Mayor Boris Johnson and the gravitas of Home Secretary Theresa May, his chief rivals. The only entry on his resume is his stewardship of the economy, and he's nailed his reputation to erasing the budget deficit and returning the economy to a surplus by the end of the decade. So his opponent, Labour Shadow Chancellor John McDonnell, is correct in his description of today's budget statement as "the launch of a manifesto for the Conservative leadership election."

On the key component, Osborne backtracked on an unpopular proposal that almost sparked a constitutional crisis last month. He intended to cut a tax-credit program that assists the poorest British families. But the Institute for Fiscal Studies calculated that 13 million families would lose an average of 260 pounds ($393) a year; of those, 7.4 million are in work, and would lose 280 pounds a year. The independent Office for Budget Responsibility said a working couple with one child would lose all benefit once their household annual income reached 21,000 pounds; previously they earned credits up to 27,000 pounds. In an unprecedented move, the House of Lords dismissed the bill.

Today, he abandoned the proposal -- turning a disaster into a mini-triumph by resisting the urge to either tinker with the cuts or simply delay their introduction. The storm of criticism shows what an oddly discordant move it was from a chancellor who helped his party win an election majority even as he championed the need for austerity. It's a reminder to Osborne that, operating effectively as a single-issue politician, he cannot afford any economic missteps on the path to the premiership.

Osborne offered what looks like the close cousin of a bribe to Londoners, proposing interest-free loans worth as much as 40 percent of the cost of a newly built house, for those who can afford a 5 percent deposit. That should help Tory candidate Zac Goldsmith when voters in the capital elect a new mayor next year.

The government is sticking with its austerity message that demands 12 billion pounds of welfare spending cuts, with the Office for Budget Responsibility predicting that lower debt-interest costs and stronger tax income will improve government finances. By 2020, the forecast is for a U.K. budget surplus of 10.1 billion pounds, compared with a deficit of 74.1 billion pounds this year.

That's ambitious. Previous targets have slipped and been missed, and with the OBR predicting annual gross domestic product growth won't surpass 2.5 percent in any of the coming five years, it won't take much for any headwinds from a slowdown in the global economy to knock the U.K. off track. For all of Osborne's political and economic skills, he's unlikely to be master of his own destiny by the time the Tory leadership election starts in earnest. 

This column does not necessarily reflect the opinion of the editorial board or Bloomberg LP and its owners.

To contact the author of this story:
Mark Gilbert at magilbert@bloomberg.net

To contact the editor responsible for this story:
Philip Gray at philipgray@bloomberg.net