Interview: Osborne – “Whatever you’re doing in terms of devolution, double it. In terms of local taxation, double it.”

29 Nov

George Osborne urges Boris Johnson, Michael Gove and their colleagues to pursue devolution of powers to metro mayors with indefatigable determination:

“Whatever you’re doing in terms of devolution, double it. Whatever you’re doing in terms of local taxation, double it.”

Osborne recounts how as Chancellor of the Exchequer he launched the Northern Powerhouse, abandoned during Theresa May’s prime ministership but now revived by Johnson as the centrepiece of the present Government’s levelling up agenda.

He looks forward to the forthcoming White Paper about levelling up, on which Gove and Neil O’Brien are at work:

“I’m optimistic about the White Paper because of who’s drafting it, and I would only tell them, not that they need my advice, to trample over anyone who gets in the way.”

In Osborne’s view, the benefits of elected mayors should be spread to the English counties, regardless of any opposition from Conservative councillors:

“The Conservative Party is quite easily led if it’s given a strong direction.”

At the end of the interview, he dismisses as “nonsense” the idea that Johnson needs a new team of advisers, and insists that success lies within the Prime Minister’s grasp.

Osborne describes how, having spent his childhood in London – “I’d grown up I guess with that world view that nothing of any importance happened outside the M25” – he came round, after becoming MP for a northern seat, to the idea of decisive action to revive the cities of the North of England.

He urges the Government to be ambitious:

“I would say…to the current crop of Conservative ministers and to the Prime Minister…you never know how long you’ve got in office, and the wheel turns, and then suddenly you’re out.

“And I can tell you as someone who’s been out of office and out of politics for five years, you look back on the big things you feel you got right, and they’re often the things against which there was the most opposition, the hardest internal arguments in your party, but they’re also the most rewarding things.”

ConHome: “Let’s start with a broad-brush question. How do you think the Government’s doing?”

Osborne: “I think the Government has every opportunity to be a great success, and it has hit what all Governments hit, which is that kind of mid-term moment when people think, you know, is the focus there, is the direction there, are they going to deliver.

“It’s not unique to the Boris Johnson Government. Something quite similar happened to the Cameron Government in 2012, 2013.

“And, you know, we got our act together and won an election. And so it’s perfectly within the capability of Boris Johnson and his team to do the same. But they do need to act.”

ConHome: “How do you assess their chances of winning the next election?”

Osborne: “Well the odds are greatly in favour of the Conservatives winning, because the Labour Party has not yet done enough in my view to make itself electable.

“Though Keir Starmer is a very presentable Leader of the Opposition, he has not distanced himself from the Jeremy Corbyn era enough, apologised to the public for presenting Corbyn to the country as a serious candidate for Prime Minister.

“He has not done internal reform to reduce the influence of the trade unions.

“When I look back at my own career, I spent half my time in Government and half my time in Opposition. Opposition is in many ways harder than Government, because you don’t have the kind of natural agenda that a Government has.

“You certainly don’t have the full weight of the British state carrying you forward. The Leader of the Opposition – the Shadow Chancellor, which I was for five years – if they don’t do something that day, nothing’s going to happen.

“And if you look at the enormous efforts which Gordon Brown and Tony Blair went through in the 1990s – I was at the time a junior staff person in Downing Street and I saw at first hand their efforts to make the Labour Party electable.

“If you think of the huge efforts that David Cameron and myself and the people we worked with went through 15 years ago to make the Conservative Party electable, you just don’t see the hunger, the effort, the appetite in the Labour Party at the moment to do what is required to win back the trust of the British people.

“But the Conservative Party cannot just sit there and rely on their opponents failing to get their act together.

“And if the Labour Party were to get its act together, which is perfectly possible, there are still a couple of years to go until the election, yes, then the Conservative Party could be in real trouble.

“It doesn’t need to be, because it has all the instruments at its disposal to make itself eminently electable and to get itself re-elected.”

ConHome: “So let’s get on to the main subject of the interview, which is the Northern Powerhouse, devolution, elected mayors and all that.

“The Treasury is often viewed as an anti-localism, anti-devolution department. In Opposition, you yourself were a bit of a sceptic about localism.

“When did you become a convert to localism and mayors, and why?”

Osborne: “Yes, my own thinking on this did change over time. I remember early on thinking the Conservative Party had made a mistake in not initially opposing the creation of the Mayor of London.

“And then once we got into office, I think the definition of localism we had was a little bit limited. It was all about giving parish councils a bit more power over planning.

“There were some ideas, actually from the Liberal Democrats, that there had to be a referendum, because at that time there were lots of Liberal Democrat councillors in those cities.

“And so the whole agenda basically went nowhere for the first two or three years of the Government I was part of, and I guess around 2012, 2013, essentially the kind of emergency job on the economy was beginning to bear fruit and we were moving out of the financial crisis period, I became very focussed on what we could do with our opportunity of being in Government to tackle the really, really big economic problems the country faced, rather than the very immediate ones of the deficit and the recovery from the financial crisis.

“And I guess because I was a northern MP, you know, I’d grown up in London, educated in London, I’d grown up I guess with that world view that nothing of any importance happened outside the M25, and one of the luckiest and best things that happened to me in my political career was that I got selected for a seat in the North of England.

“It completely changed my perspective on the country, and it changed my perspective on how the rest of the country sees London.

“And for a long time I was one of only a couple of MPs for the Conservative Party who were even remotely close to Manchester. There was basically me and Graham Brady.

“And I’d already begun to get more involved as an Opposition MP in what we could do in Manchester as a party. I supported for example the BBC’s move to Salford.

“All this kind of thinking was evolving in my head, and we got to the middle period of the Government, 2013, and I thought why not take on the biggest domestic challenge of all, which is that the North of England has lagged behind the South – and the greatest political challenge, which was that people thought the Conservative Party had nothing to say about that.

“So it was both an economic and a political challenge, and I threw myself into it, and the Treasury is sceptical of devolution, for the simple reason that it always has to pay up when devolution fails, because people will not let local public services fail, let cities fail, and in the end the Treasury has to step it.

“But the Treasury is also an amazing department, full of incredibly talented and committed people, and if they’re given direction, they have the best chance of anyone in Government of delivering.

“And so with a selection of very talented civil servants, one in particular, John Kingman; my special adviser at the time, Neil O’Brien; with one of my Treasury ministers at the time, Jim O’Neill; we really focussed on would it be possible to reverse a century-old trend in British economic geography.

“High Speed Rail was already there, in fact an idea originally born of the Conservative Opposition, not the Labour Government, so High Speed Rail, High Speed Rail across the Pennines, and devolution and the creation of metro mayors, not just city mayors which had been the original idea in 2010.

“And so a much bigger economic geography than just Manchester city centre, they’ve got all of of Greater Manchester including places like Bolton, Bury and so on, and within Merseyside, South Yorkshire and so on, real devolution, allied with a big commitment to what I would call the social capital of the cities, the teaching hospitals, the universities, the science facilities, the cultural facilities, that would make these cities really attractive places to live and to commute to work in, so that it would also help the surrounding towns.

“And that became known as the Northern Powerhouse because the speech I gave launching it was in the Power Hall of the Manchester Museum of Science and Industry, and right from the start in the front row I had Labour councillors, the Leader of Manchester City Council, Richard Leese, who’s just retiring, the then Leader of Liverpool, and so on.

“So right from the start I thought it was never going to work if it’s not a bipartisan effort, and they’re never going to trust the Conservative Government, these big Labour urban fiefdoms, if they don’t see that there’s a Chancellor who’s prepared to share the credit with them.

“And I always thought the political gain, which was very much a secondary consideration, would flow from that. People would blame the Government when things go wrong, they would give the Government credit if things went right.

“If I have a regret it’s that I’d have either started earlier or had longer in office, to really cement it, because we made enormous progress in those subsequent three or four years, we got metro mayors created in all these places, which people had been trying for decades to set up.

“We got the plans in place for the railways, we created organisations like Transport for the North, so there was enormous progress.

“We then hit unfortunately the buffers of the Theresa May Government. She was not interested in it and basically ditched it.

“And then what excites me genuinely is that the Boris Johnson Government – which calls it levelling up, which is a good slogan – had doubled down on something I thought was very important.

“So all the political stars are aligned. Of course the really hard thing in government is then actually getting the job done.”

ConHome: “Was there ever any element of wanting to push the responsibility for public spending consolidation out and down to local authorities, many of them Labour?”

Osborne: “Well yes, at the time the country was spending too much, whether at national or at local level, so there were reductions in local authority budgets.

“But we gave them more freedom, we removed a lot of the ring fences that dictated how they spent money, something I think we should go much further with.

“If I had my time again, I would have doubled down on that.

“We explicitly said, for example, if they allowed more development in their area then they would keep the proceeds, the extra council tax receipts which would come from having more homes, the extra business rates which would come from having more businesses.

“Until then they didn’t see any benefit from that, so there was zero incentive to consent to planning or to encourage economic growth.

“One of my proudest achievements was that by the time we left office Manchester was the fastest growing city in Europe. And that was certainly not all down to me and I pay a lot of credit to people like the Labour Leader Richard Leese and people who worked for him and around him.

“I should particularly credit by the way Howard Bernstein, who was the Chief Executive of the Council, who was also brilliant.

“And that partnership really delivered Manchester. And we were starting to deliver in Liverpool, in Sheffield, in Leeds, in Newcastle and so on, and I think laid the groundwork for the Conservative revival in Tees Valley as well.

ConHome: “You outlined what you did in terms of allowing councils to keep more of business rates and so on. How far do you think the tax-raising powers should go, and what should the Government do?”

Osborne: “I think you could go quite a lot further. I think you could give local authorities, I wouldn’t do it at an individual council level, I think it has to be at a metro level or a big county level, but I don’t see why you couldn’t give them their own proper business-rate raising powers.

“So it’s a choice an area would make, you could either cut your local taxes to encourage business, or you could raise your taxes and spend on infrastructure.

“I think it’s worth looking at local income taxes as a supplement. I mean after all we have that arrangement in Scotland, I wouldn’t necessarily say you have to go that far in English devolution, but I was one of the architects as Chancellor of giving Scotland more tax-raising powers, and I think as a result, by the way, the SNP is being held much more to account for its own domestic performance, and they can’t keep saying we want more money from Westminster, because everyone goes hold on, you’ve got the power to raise taxes if you want to.

“So the public are not stupid. I think it’s really interesting that when the metro mayors have come up for re-election, the good ones have been re-elected – Andy Street in Birmingham, I was also very involved in creating a West Midlands Mayor.

“I’ll give you a local example where I don’t particularly agree with the approach the Government is taking, in London, where I was for several years editor of The Evening Standard.

“Sadiq Khan is saying Transport for London – we’re having a set-to about a Tube strike – he is the Mayor, he’s the Chairman of Transport for London, and he should have responsibility for running the transport system in London.

“And the freedom to run that system as he sees fit, to raise fares if he is prepared to. And what’s happened instead is the Government has stepped in and is trying to micromanage how he runs Transport for London.

“I would let him take responsibility, because then I think the public would say, ‘Are you doing it well?’

“At the moment you’re giving him a free pass of saying ‘Well, you know, the Government’s not giving me enough money.’

“I suspect it’s not a ministerial failing, it’s just the Whitehall system seeks to take control when it has the opportunity – it’s often the simpler solution to a problem, when, you know, Covid means the Tube’s gone bust.

“But the harder solution, but the better one, is to put the Mayor in charge.

“I think it’s a great shame that Transport for the North has been downgraded – I would upgrade it with more powers, make it more like Transport for London.

“I would give the metro mayors more responsibility. For example, we devolved the NHS in Manchester, which was a really bold thing to do.

“It’s the only place in England where that’s the case. It integrates social care. There’s no reason why the Conservatives should be afraid of this.

“Fundamentally, it should be in the Conservative DNA, if you go back to Edmund Burke etcetera, that they trust local communities.

“I remember at the time, when we started all this, there were some prominent members of the Cabinet who said, ‘We’re just handing power to the Labour Party in Birmingham and Teesside and so on – we’ll never ever have Conservatives elected there.’

“And I would reply, ‘We don’t have Conservatives there at the moment – it’s not as if we’re starting from a position of giving away power.’

“And the election of Conservative metro mayors in the West Midlands and in Teesside essentially proved that point. And I would also say there’s nothing really to be lost.

“The best news at the moment from my point of view is that Michael Gove and Neil O’Brien have been given the opportunity to demonstrate this, because I think they’re two of the smartest and most creative Conservative thinkers we’ve got at the moment.

“And I would just say – well they don’t need my advice, they’re both good friends of mine – just let them get on with it.

“Every time you’re confronted with something which is, you know, ‘Oooh, should we trim a little, this is a little bit too radical, the Treasury’s got a problem with this,’ I would go for the reverse.

“Whatever you’re doing in terms of devolution, double it. Whatever you’re doing in terms of local tax-raising powers, double it. Whatever you’re doing in terms of devolving the NHS, double or triple it.

“That is why we have ministers, and we have political leadership in government: to push the system where it doesn’t want to go. For the Conservatives, this is really the once in a generation opportunity to show the whole country it can deliver.

“And if you just limit yourself to a couple of town-centre funds, which by the way the Cameron Government had, the Blair Government had, they’re not new, that’s not what’s needed.

“What’s needed is proper economic theory about creating big economic clusters in the North, bringing the cities closer together, connecting them to the towns that surround them, connecting them with real transport links that work, and attracting business, which cannot be done by the public sector alone, which is another classic mistake.

“You’ve got to make business feel that these are the places to go to, to create jobs and invest, the wonders of the free market will then work, and in a way that no Government White Paper will ever predict, real activity will happen.

“I’m optimistic about the White Paper because of who’s drafting it, and I would only tell them, not that they need my advice, to trample over anyone who gets in the way.”

ConHome: “This question of doubling everything you’re doing, does that extend to more elected mayors outside cities, in counties with smaller populations?”

Osborne: “Yes, I think it would be great to have elected mayors. I was an MP in Cheshire for 16 years, and I remember the time when we were in Opposition, I was a junior MP, and there was a plan to create unitary authorities in Cheshire.

“Pretty much all the MPs in Cheshire, led by the redoubtable Gwyneth Dunwoody, the Labour MP, and Sir Nicholas Winterton, led the fight against it, and thankfully we were ignored by the Government and unitary authorities were created, and it’s a much more efficient and effective way to run Cheshire.

“No one likes local government reorganisation, and local MPs and councillors have got to resist because it’s your local power base, but on a country-wide scale you could easily have mayors for Cumbria or Cheshire or wherever it happens to be.

“And I think the point about a mayor is it provides a point of accountability, an individual who can’t really pass the buck and is held to blame or indeed applauded for what they do.”

ConHome: “A former Conservative Leader of a big county said, ‘When I was the Leader, I had to oppose having an elected mayor in our area, because of all my Cabinet colleagues – they would all have protested and given me a lot of political trouble if I had come out in favour.

“Now I’ve gone, I’m all in favour of an elected mayor. So that leads to a political question, which is how do you deal with a mass of Conservative Cabinet members, county councillors and district councillors who won’t want any change, at a time when the Government is moving towards an election and you really need their good will.

“You should arguably have done this much earlier. Can you do this politically in the next few years?”

Osborne: “Yes, absolutely. The Conservative Party is quite easily led if it’s given a strong direction. We did succeed in creating these metro mayors in large parts of the country where there were no Conservative councillors.

“Let’s take Manchester. I remember Trafford Council, it was Tory-run, and they were like, why would we want to give power to a metro mayor in the middle of Manchester.

“The truth was the council leader at the time, the Conservative council leader was very courageous and led his group in support.

“And I always thought the best way was never to try to impose these metro mayors – to use the carrot, not the stick – so I would pile up all the advantages that come from having a metro mayor, the additional money, the support for local transport – and that did work. The hardest area was West Yorkshire and Leeds, it was politically contested, but even that now has come into line as they’re seeing the benefits.

“So you can show them the treasure at the end and they will follow the trail.

“In any organisation, it’s quite hard to lead from behind. You have to have a view, and ultimately if people don’t like you, they’ll get rid of you.

“There’s no point just occupying those offices. I always felt [as Chancellor of the Exchequer] there was a ticking clock, I never knew when the axe would fall, and I would try to be as bold as possible.

“I would say the same to the current crop of Conservative ministers and to the Prime Minister, which is you never know how long you’ve got in office, and the wheel turns, and then suddenly you’re out.

“And I can tell you as someone who’s been out of office and out of politics for five years, you look back on the big things you feel you got right, and they’re often the things against which there was the most opposition, the hardest internal arguments in your party, but they’re also the most rewarding things.”

ConHome: “So far, hasn’t levelling up really been a bit of a mess? You’re right to say that Michael Gove is a great executive politician – Neil O’Brien a huge brain, did a column for us – they will instil some order and political shape to it.

“But so far, hasn’t it been a bit incoherent? And has it had the strategic grasp the Northern Powerhouse had, in terms of a very clear plan to link up the cities, make them bigger, establish an economic counterweight to London?

“Hasn’t levelling up by contrast been a bit of a shambles?”

Osborne: “Well I am a glass half full person. I would say it was moribund for several years after I left office, as an agenda, and obviously there were enormous distractions, Brexit and then more recently Covid.

“But I think Boris Johnson deserves full marks for picking this up as the big domestic agenda. That’s what a Prime Minister does. A Prime Minister says ‘My Government’s going to be defined by a few things’, and he has decided levelling up is one of them. So I strongly applaud him for that.

“I also applaud him for now having the right people in place to deliver it. I wish he had stuck with, and I think he will end up recommitting to, elements like the High Speed line in Yorkshire, the Eastern Leg, and the Trans-Pennine route, because those are long-term infrastructure projects which you don’t want to throw away and start again on some other project that’ll never get off the ground.

“So I’m quite optimistic about it all. What it needs is proper intellectual underpinning. If you think it’s all just about planting some civic flowerbeds in northern towns then the Tories will be out on their ear.

“It’s got to have proper, serious economic thinking about it, which Jim O’Neill, a world-class economist, provided me with on this, and others like Neil O’Brian and Rupert Harrison.

“There are around the world great city clusters. They are where the action is. The towns around them benefit as well, but a bit more slowly.

“And you have to do the things that make those cities work, so you have to make them exciting places that attract professional people, you need the buzz of universities and cultural institutions, you need excellent transport links between the cities and commuter links into the cities, and you need to empower the city leadership.

“If you’d said to me 30 or 40 years ago that Manchester would be the fastest growing city in Europe I would have thought it was an impossible ambition, because the Manchester area was on its knees.

“You have to think big, you have to be ambitious, and you have to realise that Government puts the kind of instruments in place, but then it’s the private sector and the business community, and not just the big corporates but every little small business, every entrepreneur that decides actually I’m not going to move out of Manchester, I’m going set my new web design business in Manchester rather than move to London. That is how progress is made.

“I think the Johnson Government can do it. It’s got the majority, they’ve made this its central domestic agenda, and if it sticks with it it can work.

“One of the things I find annoying, having been a political secretary in Downing Street in the distant past, is all this ‘Boris Johnson needs a new team in Downing Street. He needs grey hairs around him. He needs as Deputy Prime Minister a Willie Whitelaw-type character.’

“All of that is such nonsense. Actually in my view the Downing Street team is pretty talented at the moment, and they are a good team.

“And there are some real issues the Government’s got – it’s got a difficult economic backdrop, falling real incomes, it’s got to repair the relationship with Europe, which is absolutely critical to Britain’s economy, its immigration policy, its security policy.

“These are the big tasks alongside levelling up. But the idea it’s all going to be solved with some reshuffle of the kitchen cabinet or indeed the Cabinet is in my view nonsense.”

ConHome: “You’re really saying the problem with Boris Johnson isn’t his team, the problem with Boris Johnson is Boris Johnson.”

Osborne: “No I’m not actually, because I think Boris Johnson has the kind of charisma and leadership to deliver a lot of what he’s set out to do.

“But governments in the mid-term, they have to kind of refocus, and the glittering prize is there if they just reach out and grab it.”