Osborne — the Master Strategist?

George Osborne – Britain’s Chancellor of the Exchequer – is meant to be a fine political strategist, the Conservative’s super-hero, all realist and machine politician. Conservative commentator Tim Montgomerie described him once as the coalition government’s “chief executive”, who not only is masterminding the coalition’s deficit and growth strategy but is overseeing the Conservative’s election strategy, he argued.

In an article in The Times, Montgomerie noted that sources had told him that at roundtable meetings involving senior Conservatives and Liberal Democrats heads rise and look to him” and not Prime Minister David Cameron “when anyone makes a controversial statement.”

Well, if Osborne is the man the Conservatives are relying on to maneuver them into a position to secure a majority at the next election, they may find they are banking on the wrong man.

In the past few weeks, he has managed to anger pensioners and the elderly with his so-called “granny tax” and provoke outrage with his proposal to cap how much money the rich can give to charity. It is to say the least pretty extraordinary to have united the charity world in one huge rebellion – and, of course, all those charities will grouse to all their donors about the meanness of the government. The cap would also seem to have undermined totally Cameron’s Big Idea of the “Great Society.”

As master strategist Osborne has been pushing recently a series of measures and airing proposals that seem to be anything but sure-footed and several seem designed to irritate the hell out of natural Conservative voters, an odd way of going about building an electoral majority.

Even small strategies aimed at wrong-footing the Labour Opposition have backfired – this week his wheeze of suggesting that all Cabinet ministers should reveal their tax details backfired when Labour endorsed the idea to the horror of many Conservative politicians and the Tory press.

As Graeme Archer noted in the Daily Telegraph, before long every candidate for public office will be pressured to disclose their tax arrangements. “No one who builds a business and arranges their tax accordingly will want to face the scrutiny of standing for public office, or the ordure entailed in making money and legally reducing the tax you pay on it,” he writes.

So when will Osborne start losing his reputation of being a master strategist?

 

Dollar or Pound?

A relative wrote me to ask whether she should change pounds for dollars on the grounds that the dollar has weakened during the debt ceiling showdown and would likely increase in value once a compromise had been struck in Washington DC. This is what I replied:

“I am glad you are so confident that a last-minute deal will avert a technical default. I think a lot could go wrong before then. And if a deal is struck, it will be the two-part Reid-Boehner compromise that in effect will kick the can down the road and will merely delay the reckoning. In other words, this failure of mature government is to be repeated in a few months time.

On the macro-level, I agree with Mohamed el-Erian (PIMCO’s CEO) that long-term damage has already been caused to the U.S. and that international investor confidence has been shaken by what has been taking place in the past few weeks. It is quite likely that the rating agencies will downgrade the U.S., even if the Reid-Boehner compromise is agreed. That will knock the value of the dollar.

Despite the awfully slow economic growth in the UK the last quarter, I still believe that the Coalition is basically on the right track – UK debt reduction is essential and more necessary than debt reduction in the U.S.. For example, the U.S. deficit could disappear with an increase in government revenue, i.e. tax increases. That is off-the-table, alas, at present because of the economic illiterates in the GOP House caucus, who believe incorrectly that any tax increase will restrain economic growth.

In other words, I think the pound is a better bet than the dollar in the medium term. Could you make a small profit by buying dollars now and maybe in a few days time, if a deal is struck, see a dollar value rise and be able to exchange back to pounds beneficially? Maybe you could, but it is a risk and I am not sure that you should be risking your capital.”

And what happens if a deal is not done, even the Reid-Boehner plan? I know there is a temptation to risk but I myself would avoid it.”