Too many Leavers were on benefits and had too little to lose
George Osborne finally emerged from hiding yesterday with a statement to reassure us all. The British financial system and economy will not collapse, he declared, and that’s partly because of the fine job he’s done at the Treasury.
Well, up to a point, Chancellor. What he didn’t say was that he and his colleagues failed in one of the elementary tasks that should guide any Tory leadership: getting more people off their reliance on the state. Had he done so, it’s just possible that a greater number of optimistic, self-confident voters with something to lose would have saved his bacon and voted Remain last week.
A large number of Brexit voters feel left out of Britain’s success, the surveys show. These voters believed that while Brexit would be bad for the economy as a whole, it wouldn’t affect their household finances. In other words, they had little to lose. The only shift in voters’ judgment on this occurred after Mr Osborne’s “emergency budget” threatening massive cuts and tax rises, but that wasn’t enough.
That is partly because Gordon Brown spent years building up a system, unique in Europe, in which more people owe the health of their finances to government hand-outs than a real, wealth-creating economy.
The correlation between a Brexit vote and receipt of these government credits is striking in many parts of the country. Boston in Lincolnshire, for example, revealed itself to be the most pro-Leave district in Britain last week, with three-quarters of people voting for Brexit. Boston is also one of the areas getting the most from the benefits system: nearly a third of its families rely on benefits of some kind, according to government data. People who rely less on company investment and productivity for their daily bread than on hand-outs are more likely to take a risk with Britain’s international trade and reputation. After all, why not?
It was only five years after first becoming Chancellor that Mr Osborne tried to cut down on benefits spending. He was defeated by his own backbenchers because he had not considered how to build support for the policy and make it humane. Instead, he adopted a hamfisted, short-term tactic: raid the welfare bill when economic forecasts don’t go your way.
But tax credits are just one part of the problem. They are a symptom of a deeper malaise: a country in which too many people do not feel that basic middle-class aspirations like owning a house are achievable. The Government has done nothing to boost housebuilding on the scale required. It has endlessly put off vital decisions on infrastructure, like a third runway at Heathrow or the expansion of Hinkley Point.
It’s not all dire news. We have record numbers of people in work and our banks have huge stocks of capital and liquidity. Mr Osborne deserves some credit for punchy rhetoric that kept up market confidence in Britain over the last six years. But with Brexit shaking investors’ belief in Britain, the lack of serious reform leaves us dangerously exposed. Mr Osborne should not be crowing about his great success in fixing the fundamentals of our economy. Strongly worded speeches aren’t going to work any more. We need real reform.