Bloomberg News

Osborne Pressured as U.K. Slump Seen Deepening in Past Quarter

July 22, 2012

U.K. Chancellor of the Exchequer George Osborne

George Osborne, U.K. chancellor of the exchequer. Photographer: Chris Ratcliffe/Bloomberg

George Osborne faced intensifying scrutiny of his performance as Chancellor of the Exchequer before the publication of data that might show Britain stayed mired in recession in the second quarter.

Two polls for newspapers published yesterday showed twice as many voters want Osborne replaced than the proportion that would prefer to keep him as finance minister, while the British Chambers of Commerce said the government’s policies to promote economic growth are insufficient.

The pressure on the architect of Prime Minister David Cameron’s signature deficit-cutting strategy precedes a potential reorganization of the premier’s ministerial team. It also heralds a week of focus on gross domestic product data due on July 25, juxtaposed against the fruits of infrastructure investment as the Olympic Games begin in London two days later.

“I’d like to see a bit more supply-side stuff, I’m sure that more could be done and I’m sure that the government would love to do it,” London Mayor Boris Johnson, a member of Cameron’s Conservative Party, told the BBC’s Andrew Marr show. “I would like to see a very aggressive campaign for more infrastructure investment. It can be readily financed, as we’ve seen with the Olympic Village, with Olympic investments.”

That comment echoed a call from the BCC, a lobby group for more than 100,000 U.K. businesses.

“The government could act far more boldly to improve the U.K.’s infrastructure,” BCC Director General John Longworth wrote in the Observer newspaper. “Since infrastructure investment here is insulated from the euro-zone crisis -- unlike exporting -- it would create short-term confidence, jobs in the medium term and long-term competitiveness.”

Growth Challenge

An indication of the growth challenge faced by Osborne will come with the release of GDP data predicted by economists to show contraction for a third consecutive quarter in the three months through June. The economy shrank 0.2 percent, according to the median of 36 forecasts in a Bloomberg News survey.

Forty-four percent of voters polled by ComRes Ltd for the Sunday Mirror and Independent on Sunday said Osborne should be replaced, while 20 percent said he should remain. A YouGov Plc (YOU) poll for the Sunday Times showed 48 percent in favor of Cameron removing Osborne, with 20 percent wanting to keep him. ComRes questioned 2,006 voters on July 18 and July 19. YouGov took 1,617 responses on July 19 and July 20.

Mr. Popular

Culture Secretary Jeremy Hunt spoke out in defense of Osborne on Sky News, while also arguing to be allowed to keep his own position if Cameron reorganizes the government.

“You don’t become chancellor because you want to be Mr. Popular,” Hunt said, citing examples of former holders of the post including Nigel Lawson, who served under Margaret Thatcher. “George Osborne has been one of the bravest chancellors in history,” and has “kept Britain out of the firestorm that has engulfed the euro zone and many other countries.”

Lawson said that Osborne should continue in the job while relinquishing his role as the government’s chief strategist.

“It might be sensible to give up the formal role and focus exclusively on his job as chancellor,” he said in an interview with BBC Radio 4’s Week in Westminster. “His last budget was not his biggest success.”

After Osborne’s budget in March, the government backed down over plans to tax hot food and mobile homes, cap tax relief on charitable donations and increase fuel duties.

Voters in the YouGov poll put Business Secretary Vince Cable, a member of Cameron’s Liberal Democrat coalition partners, at the top of the list of who should replace Osborne.

Deficit Strategy

Cable, questioned on economic policy on BBC Radio 4’s World at One program, said that the government is showing “flexibility” in its approach to cutting the deficit.

“We know we have to have budget discipline,” he said. “It’s important to have the credibility of our creditors as we’re having to borrow very large sums of money in order to finance the deficit, but it’s got to be done in a sensible way that reflects the state of the economy.”

Cable refused to rule out the possibility that he could one day lead the Liberal Democrats, in an interview with the Financial Times published July 21. Nick Clegg, the current incumbent in that position who is deputy prime minister, told the People newspaper that he could consider a coalition with the opposition Labour Party after the next election.

The lukewarm relationship between lawmakers in the current coalition government was underlined by Matthew Oakeshott, a Liberal Democrat member of the House of Lords and a former Treasury spokesman for the party. Speaking “on coalition message,” Oakeshott defended Osborne’s record on Sky News.

“Given that he’s had no experience outside the backrooms of politics, he’s never worked in industry, he’s never worked in business, I think he’s actually doing a very good job for a chancellor on work experience,” Oakeshott said in a discussion with former London mayor Ken Livingstone, a Labour Party member.

Livingstone jested that Oakeshott’s comment was “the most underwhelming bit of praise I’ve heard in my life.”

To contact the reporter on this story: Craig Stirling in London at cstirling1@bloomberg.net

To contact the editor responsible for this story: Craig Stirling at cstirling1@bloomberg.net


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