As time goes on, much of Osborne’s work will drift into the background but he will be remembered for two things: austerity and politics. Osborne stuck to austerity in the face of heavy criticism - something for which he should be credited. A lot of his other work, however, such as presiding over the recovery of the UK economy will be overshadowed by these measures. Osborne will, however, be unfavourably remembered for an over fascination with the political side of his job and even prioritising it over his more important economic role.
Although the word ‘austerity’ was so prominent during the whole of Osborne’s time as Chancellor, it is more appropriate to describe his actions as fiscal consolidation. At no point, did total government spending fall in absolute terms (see graph). This is because government spending in some key areas (health, education and international development) had been ring-fenced. Moreover, health and education are a large proportion of government spending (see pie chart) so ring-fencing these areas meant that it was extremely difficult for the government to cut spending significantly. Therefore, this brings us to a major misconception regarding Osborne’s legacy: he did not bring austerity but fiscal consolidation.
Another issue arising from Osborne’s determination to balance the books is that it has clouded almost everything else about his tenure. Osborne did in fact take the economy from one of its worst ever crises to a recovery and now a period of relative economic prosperity. Unemployment fell from around 8% when he came into office to 4.9 % now (see graph). Furthermore, Osborne could be praised for his work regarding the renewal of the North: in May 2015, the North East was the fastest growing region in the country with its index of business activity at 62.4 in April (also the highest in the country).
Of course, just as his successes are ignored, so are many of Osborne’s failure. He did not invest nearly enough in infrastructure and oversaw a significant rise in the current account deficit. The current account deficit went from roughly £5 000 million in 2011 to over £30 000 million in 2016. Thus, the judgement of Osborne’s overall impact will always be clouded by a greater focus on his fiscal consolidation plan.
On the other hand, Osborne’s measures for fiscal consolidation also deserve significant praise. In the early parts of 2013, major international organisations were criticising his measures. The IMF advised Osborne to look for a ‘Plan B’ as it felt that Osborne’s ‘Plan A’ was not supporting the economy at the time. Osborne, however, stuck to his initial measures and was later praised for this. In the summer of 2014, Christine Lagarde subsequently admitted that they were previously wrong for their criticism and that fiscal consolidation was indeed appropriate for the UK economy. It is largely to Osborne’s credit that not only did he make a success of fiscal consolidation, but he also stuck to it at a time when major and influential international players were against it.
Perhaps the greatest criticism of Osborne was that he was too political and not economic enough in his role as Chancellor. In his March 2015 budget, alongside his measures for fiscal consolidation, Osborne made the first £1 000 of savings income tax-free. Osborne was later quoted to have said, ‘It will only really be of help to stupid, affluent and lazy people, who can’t be bothered to put their savings away into tax-efficient vehicles!... But it will still be very popular – we have polled it’. After this action, in his March 2016 budget, Osborne came up with a plan to majorly reduce increases on spending on disability benefits. One cannot help wonder if the only reason Osborne was happy to cut here but take away revenue from savings was because of the effect it would have in polls. Osborne was always very close to David Cameron, and perhaps their combined political interest began to compromise his economic job.
In conclusion, although Osborne was famous for austerity, he really should be remembered for fiscal consolidation. He deserves credit for his plan of fiscal consolidation and for sticking to it, but this comes at the cost that it will put much of his other successes (and failures) into the background. Whether this aspect of his legacy is looked on positively will depend on whether people judge fiscal consolidation to have been necessary. Osborne, however, will certainly be looked on unfavourably for playing too much of a ‘political game’ at times and not focusing on the economics at all times.