All change

It has been a momentous day, to be sure. No sooner did David Cameron depart the scene than Theresa May became the 54^th person to occupy the role of prime minister in a line stretching back to 1721. We also have a new Chancellor of the Exchequer, Home Secretary and Foreign Secretary (Boris Johnson of all people). There are thus new incumbents occupying all the so-called Great Offices of State. But on a day such as this, it pays to pause and reflect.

My own view is that the end of David Cameron’s career in front line politics is a waste of good political talent. He certainly comes across as a decent man who is a great communicator. Yet historians may reflect that the balance of his achievements did not weigh too heavily in his favour. Admittedly the economy has recovered nicely over the past three years, but it has been a slow haul and the austerity inflicted by his Chancellor did a lot to stir up the passions which culminated in the Brexit vote. For a man who apparently believed in one nation Toryism, Cameron managed to sow domestic divisions with his ill-judged referendum in Scotland and the disastrous referendum on EU membership. Foreign policy has not been a raging success either, backing intervention in Libya which served only to cause the country to implode. For some, his biggest mistake occurred even before he came to office when he removed Conservative MEPs from the centre-right faction in the European Parliament, thus damaging attempts to form decent relationships with key European allies.

But now he’s gone, and in his place comes a prime minister who has inherited what might appear to be a poisoned chalice. Mrs May certainly has her work cut out. Her speech in Downing Street this evening was described by a friend whose judgement I trust as one which sounded more Labour-like than any current Labour politician could credibly deliver. It was, as the journalist Polly Toynbee tweeted a “devastating analysis of UK social injustice.” It was a clear recognition that the economic policy of the previous regime has helped to exacerbate many of the social tensions which exist outside the London bubble, and it is why George Osborne is no longer Chancellor of the Exchequer.

Osborne was committed to balancing the budget. He failed. Public borrowing in the last fiscal year was almost four times what had been predicted at the time of the June 2010 budget, and whilst not all of this was his fault the Chancellor promised too much too soon. There was a general failure amongst all politicians to recognise the severity of the crisis which hit in 2008 and that it was always going to take at least a decade to try and fix the public finances. But instead of trying to take it slowly, the government frontloaded a significant amount of austerity in the form of a squeeze on public spending. Unfortunately this was insufficient to get the deficit down as rapidly as desired, and Osborne was forced to continue asking for more. By the time the 2014 Pre-Budget Report was released, the OBR’s projections suggested that the share of government spending in GDP was set to fall to its lowest level since the 1930s.

It is notable that Ireland introduced a savagely tight fiscal policy following the financial crisis, which at least succeeded in eliminating the public deficit. There was widespread unrest, and it did result in a backlash following the 2016 election, but Fine Gael remains the largest party in the Dáil, and the government has taken the foot off the brake now that the job has been done. In the UK, there is a sense that the job is far from done. So the government must stick or twist: try harder to eliminate the deficit and risk further unrest, or ease off and accept that the current timetable of achieving a current surplus by 2020 is unrealistic. All the noises we have heard so far suggest that the latter will be the most likely course of action.

But this raises another problem: If the government scales down the tightening in a bid to heal some of the divisions which have occurred recently, what was the point of the last six years of austerity? It appears to have achieved very little: Yes, the deficit has been reduced but by far less than planned, and at the cost of widespread dissatisfaction with the thrust of policy which prompted the electorate to stick up two fingers on 23 June. As I wrote in October 2010, ahead of Osborne’s first Comprehensive Spending Review, “Spending cuts are a gamble which must work. It is not the rating agencies which the government has to fear: It's the electorate.” It proved to be far more prophetic than I could ever have imagined.