Osborne capitalising on public’s mistrust of his Labour opponent

BRITISH CHANCELLOR of the exchequer George Osborne yesterday curbed public pay rises for two more years; told 50-year-olds that their retirement will be pushed back by a year and promised the British public years more of austerity.

Such news should normally have a politician in the stocks. And yet Osborne was the one to leave the House of Commons chamber with his head high, having witheringly put down his Labour opponent Ed Balls.

Balls is one of those most responsible for the sins of the Labour years, given his close relationship with Gordon Brown, said Osborne, adding that he has refused to repent, continuing as he does to argue for higher public spending.

Balls, he said, does not even have the excuse available to Labour leader Ed Miliband, who was “only photocopying orders” when he was the junior in the treasury after 1997.

Osborne summed up British political realities in a few phrases: the public is unhappy with the pace of cuts, yet cannot warm to Balls, the man most loudly railing against them.

Nor do they regard Miliband as a prime minister-in-waiting while, equally, the majority accept the euro crisis has strengthened Osborne’s claims that the markets would have targeted the UK if he had not acted like he did.

Some of this is untrue, or, at least, was not true when Osborne first started to blame the euro for the British economy’s performance, but there is little doubt that it will become more true in the weeks ahead.

Britain’s economy started to peter out long before the euro crisis reached its current state, helped by the public spending cuts that he ordered – cuts that will lead to the loss of 710,000 public sector jobs by 2015-16.

Today, hundreds of thousands of public servants will go on strike, in protest at their pension cuts. Anger among public servants has drifted far beyond the militant; even head teachers will take up placards.

Having made some concessions, Osborne refuses more. More significantly, he chose yesterday as the day to announce plans that will lead to pay cuts – or, at least, no pay increases – for public servants in remote areas.

Currently, London-based state workers get a “weighting” to cover vastly higher living costs , but Mr Osborne believes that public salaries elsewhere are stifling private enterprise. Under the move, pay for teachers, civil servants and nurses will be set in line with local rates. “This is a significant step towards creating a more balanced economy in the regions of our country that does not squeeze out the private sector,” he said.

Politically, the timing of his action is the equivalent of a two-fingers to the unions, but Osborne is gambling that the public sector enjoys far less support on the pensions issue than it believes it does.

In truth, he had little, if any good news yesterday: the battle to control the deficit and debt will take longer to win, while public spending cuts will continue for two years after the life of the current government ends in 2015.

Faced with the public’s increasing pessimism about his abilities and about their future, he opted to neutralise some sores, most particularly deferring, but not abandoning, a planned hike in petrol duty.

A campaign to sell off council houses at a 50-per-cent discount will be launched, but, unlike in the 1980s, every penny raised will go towards building new ones, offering a badly needed boon to the ailing construction industry.

Elsewhere, employers will find it easier to sack workers, health and safety rules will be relaxed, while those with assets will qualify for a one-year “pass” from capital gains tax next year if they sell assets and invest in a start-up.

Insisting, in the face of Labour jeers, that the size of the structural deficit inherited is worse than he had thought, he said: “The boom (under Labour) was even bigger, the bust even deeper, and the effects will last even longer.”