Whoever emerges winner from the meatgrinder of the Tories’ leadership contest, it’s obvious who lost: George Osborne. The “long-term economic plan” of the once supremely powerful chancellor, fêted as Britain’s next prime minister, disintegrated inside a few years.
The plan rested on three planks. First, and critically, were the public spending cuts. These were justified by the century-old “Treasury View” of the public finances, in which spending must always expect to balance with tax revenues. Economically nonsensical, and rarely observed in practice—Britain has run a fiscal deficit in almost every year since the Second World War—this belief is nonetheless wired into the British state’s most important economic institution.
In office, Osborne pushed through the deepest programme of public spending cuts in Britain since the Great Depression. The result for the whole economy, and most of us living in it, was predictably bad: squeezed government spending became persistently low investment that drove low productivity which, in turn, became low (and even falling) real wages during the 2010s.
Second, Britain was to retain its half-in, half-out relationship with the EU: outside the euro, but inside its other institutions, exploiting the benefits of single market access—not least for its financial institutions—while using its lack of deep commitment as leverage. The referendum on Britain’s membership, included in the Conservative’s 2015 manifesto, was thought to be a minor inconvenience, with both Osborne and Cameron expecting a clear Remain victory.
Third, a new “Golden Age” with China. Britain’s future would be as the financial lynch pin of a “renewed globalisation,” following the 2008 crisis, centred now on the Global South. Fast-growing China, already the world’s second-largest economy by 2011 and holding out the dizzying prospect of a vast new market for financial products, was the centrepiece of the strategy. The first offshore renminbi bonds were offered for sale in London. Restrictions on Chinese bank subsidiaries operating in the UK were loosened.
Osborne thought Britain should “run towards China”—and he did, happily trooping off, in September 2015, metaphorical cap in hand, not only to China but to Urumqi, capital of Xinjiang, where he proclaimed Britain’s “absolute commitment to support the growth of Urumqi together with the whole of the Xinjiang region”—months into a brutal “anti-terror” crackdown by the authorities.
Since the vote to Leave in 2016, every plank has been kicked away. Britain is not only out of the European Union, but outside of the single market, the customs union, and unlikely even to get the much-needed “equivalence” status for its banks and financial institutions to trade freely inside the bloc. Theresa May, entering Downing St in the turmoil following the vote, turned against China. Huawei, against the advice of the Intelligence and Security Committee, was banned from UK 5G infrastructure. Our self-described “Sinophile” prime minister is (we assume) on his way out. Rishi Sunak, the frontrunner to replace him, has been derided as wanting to “kowtow” to Beijing for attempting to negotiate one of those post-Brexit investment deals we otherwise heard so much about. Every other remaining candidate is a China hawk.
And austerity, the centrepiece of the whole Osborne strategy, has halted. His last, desperate throw of the dice in the EU referendum campaign, as it became clear Remain would likely lose, was his threat of an austerity-max “Emergency Budget” were the country to vote for Brexit. The threat proved completely hollow. The austerity programme was dealt a blow to its credibility from which it never recovered. Today, the more pro-Brexit the Tory, the less concerned they typically are about the deficit. May turned rhetorically against austerity but it took the traumatic 2017 general election result, and its messy aftermath, to produce a Tory prime minister who ended the cuts, with Johnson pushing through real-terms spending increases shortly after he arrived in office in 2019.
The nearest equivalent to Osborne today is Sunak—himself a creature of the Treasury View, once a shoo-in for PM, today struggling to present his case for balancing the books against a crowd of opponents who have instead prioritised tax cuts, more investment or even breaking up the Treasury itself. Osbornomics is long gone. The challenge for whoever emerges triumphant in September will be in defining an alternative.
