Whenever someone wishes to dramatise a bad government decision, they are likely to recall the greatest fiasco of the Thatcher years and invoke the poll tax. It has been used variously to condemn rail nationalisation (“poll tax on wheels”), plans to introduce identity cards and even George Osborne’s ill-judged 2012 budget and, among other thing, his “pasty tax”. Now the same language is being used, not least by worried Conservative back-benchers, to describe the Chancellor’s plans to cut tax credits.
Last Thursday the issue crossed that significant, if invisible, barrier that separates statistics from human drama. Previously, the argument had revolved round calculations from the Institute for Fiscal Studies. Then, on the BBC's Question Time, a single mother who said she had voted Conservative in May, confronted Amber Rudd, a cabinet minister, with her own plight. Ms Dorrell said she would lose out badly from the coming changes.
Let’s put to one side the (admittedly massive) rights and wrongs of Osborne’s measure. In hard-headed political terms, is he heading for a poll-tax-style political catastrophe?
To attempt an answer, I start from the assumption that Osborne has thought hard about the consequences. He is extremely clever and a shrewd political strategist. He is unlikely to have stumbled into a political catastrophe by mistake. So what does he think he is up to?
Here is my guess. He knows that many people will be hit hard by his cuts. But he reckons that this will not cost his party many votes at the next general election—and may even end up boosting Conservative support. He has four reasons for thinking this.
- The absolute number of people hurt by the cuts is large (around three million), but they are proportionately small (around 7 per cent of the electorate) and few of them vote Tory anyway.
- By 2020, economic growth, the planned rise in the minimum wage, and other measures such as extended free child care, will have offset at least part of the costs the three million will incur next April. Their standard of living maybe lower than it is today, but it is likely to rising.
- The savings in government expenditure on tax credits will enable it to cut the deficit and/or spend more on other services, such as the NHS. By the time of the next election, the Tories will have a good story to tell about Britain’s overall economic revival and prudent public finances.
All that is widely remembered. What is generally forgotten is that the political explosions erupted before the poll tax was actually introduced. Millions of people feared they would be worse off and were angry about it. Then, in April 1990, householders received their letters telling them what they would have to pay. While many people were, indeed, worse off, many were either better off or not as badly off as they feared. Tory support started to recover. By June 1990, both Gallup and MORI found that the Conservatives had gained 6-8 points. They still lagged Labour, but not by nearly as much as in the weeks leading up to the poll tax’s introduction.
One reason this recovery is seldom recalled is that by the autumn, Thatcher and her party were in trouble again; and by the end of the year she had been ejected from office. But, contrary to folk lore, the poll tax was not the main reason for her departure: she fell more because of her stance on Europe.
To say this is not to defend the poll tax. It was a rotten idea to replace a cumbersome but broadly progressive local rates system with a flat-rate charge. It should never have been introduced. But the political, as opposed to moral, lesson of its introduction is not quite as politicians and journalists tend to think.
So, could Osborne tough this out, wait until people find out how much they will actually lose (rather than what they fear in advance they might lose), and then look forward to eventual electoral dividends in 2020?
Possibly. But I would not be surprised if he softened the blow by amending his plans when he comes to deliver his Autumn Statement next month. I suspect that, for all his intelligence and strategic guile, he has been surprised by the intensity of criticisms from his own side. The danger he faces is that he will be tarred as someone who doesn’t really care for or understand people who work for low pay, despite his announcement of large increases is the minimum wage. If he is serious about standing for party leader when David Cameron stands down, Osborne can’t afford to let that reputation take hold. That is why Ms Dorrell’s intervention last week matters: not because Osborne is that concerned about losing her vote, but because he does worry about the impact she has had on the people he really does worry about—other Conservative MPs.
