Is George Osborne banking on lessons learned from William Gladstone?
In his task of righting the wreck of the good ship Britain, chancellor George Osborne has plenty of inspiration to draw on.
Many of his predecessors faced equally challenging and even appalling situations when they got the dreaded summons to move into No. 11. And yet many performed miracles.
Here's a few who rose to the occasion:
- In the last decade of the 19th century, the forgotten George Goschen saved the City from the collapse of Barings and adroitly managed the decline of sterling.
- To fund the Great War, Bonar Law somehow managed to raise a quarter of expenditure from normal revenue although Britain was basically broke. That's still considered one of the great feats of any chancellor.
- And after the war, Austen Chamberlain was able to convert an annual deficit of £1.7bn into a surplus of £340m in two remarkable years.
- Blighting the copybook, Winston Churchill restored the gold standard in 1924 so "the pound could look the dollar in the face". He nearly ruined the economy.
- In 1931, Austen's brother, the much maligned Neville gave our George a star to steer by. He walked into a full-scale Depression but bit the bullet, introduced a series of austerity budgets, built up reserves and stabilised the pound, all in six years.
- Kingsley Wood cobbled up money from everywhere to fight the 1939-45 war. American and Empire loans, a 100% excess profits tax, fire sales of British overseas assets: He did them all and more. Exhausted, he died on the very day he was to announce the introduction of PAYE, a boon to every later chancellor because of the cashflow it gave them.
- In 1945, Labour's Hugh Dalton, who said he "swallowed my fate in one gulp", inherited the biggest national debt in the history of the world and an economy "close to bankruptcy". The job ruined his career.
- In 1951, Conservative Rab Butler likewise inherited a gigantic balance of payments problem that also ended a promising political career.
- In 1967, Jim Callaghan had to devalue sterling and humiliatingly go cap in hand to the IMF for US$3.9bn in credits to bail Britain out. Nearly ruined his career.
- Things were so bad when Denis Healey took over from Callaghan that, as later wrote, he soon learned "to exude confidence, without actually lying". This impossible job was probably why he never became prime minister.
Candle-ends and cheese-parings
Heroes all, or most of them.
Because of his ferocious attack on public spending, Osborne is probably closest to William Ewart Gladstone, the tight-fisted Scot who once thundered: "No Chancellor is worth his salt who is not ready to save …. candle-ends and cheese-parings in the cause of the country."
While funding two wars, Gladstone made his (tiny) staff re-use the envelopes and re-sharpen the pencils down to the stump -- and this at a time when the Britain ruled the waves.
To Gladstone, all public expenditure was almost a sacred responsibility. Taxes, he said in a 21-point list of reforms for the Exchequer, should be collected for specific purposes and deployed in the people's interest only after the most careful consideration, and in as transparent a way as possible.
"Finance is, as it were, the stomach of the country from which all the other organs take their tone," he said. I can think of a recent chancellor, a historian as it happens, who might have remembered that.
Fructify and prosper
Under the great Gladstone, the vast majority of Britons paid much less tax than did the rest of Europe, something of which he was particularly proud.
He argued that money left in the people's pockets would "fructify" in ways that improved their prosperity. And, funnily enough, it did.
A generation later, economists such as Keynes and America's Mariner Eccles would identify why. It was not the stock of money, they proved, that made the people prosperous. It was the velocity of money. That is, money shouldn't be hoarded; it should be spent.
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