What does Osborne want?

There were several surprises in George Osborne’s sixth autumn statement as chancellor of the exchequer, but the announcement that grabbed the headlines was the (temporary) reversal on cutting working tax credit. For some commentators, that volte face, and the chancellor’s performance more broadly, was a display of unparalleled acumen. Here was a politician, they purred, at the top of his game, an exponent of statesmanship who could seize the centre ground while almost issuing an apology. For others, including the shadow chancellor, John McDonnell, Osborne’s offer was a political capitulation of the first order, a premier cru bottlejob by a champagne charlie. The truth, unsurprisingly, is somewhere in between, but what shouldn’t be overlooked is Osborne’s ambition for the top job.

The scale of the turnaround on tax credit is, in the details, unimportant. In the long term, the reforms will still be implemented, as part of the delivery of universal credit by 2020. But Wednesday was an important moment all the same: anti-government protest over the last five years has met with scant returns. Demonstrations, strikes, even the rise of three insurgent parties to the forefront of British politics didn’t prevent a Tory majority last May.

Three factors explain both Osborne’s backtracking on tax credit reform and his major concessions to the police and armed forces. First, he could claim to be able to afford it, as the Office for Budgetary Responsibility now estimates that the Treasury will be £27 billion better off by 2020 because of increased revenue from existing taxes. That figure may be optimistic – it wouldn’t be the first time the OBR has got its sums wrong – but it allowed the chancellor to promise to eliminate the deficit by 2020 while appeasing important constituencies.

Second, the government has a working majority of only 12. With a Labour leadership opposed to tax credit reform, Osborne knew he would have to rely on his own MPs, many of whom had publicly criticised the reforms.

Third, and most important, the chancellor would like to be the next prime minister. In the home stretch to being anointed Cameron’s successor as leader of the party and possibly the country, any molehill in danger of turning into a mountain had to be dealt with immediately, even if that meant public contrition.

The chancellor’s ‘unexpected’ decisions can be explained, as so often in politics, by a combination of political expediency and personal ambition. Corbyn and McDonnell made a difference to the chancellor’s changing his mind, but so did Boris Johnson – a public critic of the tax credit reforms – and Theresa May. The chancellor outflanked the home secretary in wooing the police because May – along with Johnson – will be one of Osborne’s most potent challengers for the leadership.

All of which creates a curious setting for British politics between now and 2020. The anti-austerity movement, arguably for the first time, has wrung a major concession from the chancellor. It has done so with a radical leader of the parliamentary opposition putting pressure on a slender governing majority. The situation was very different for the first Cameron government, which in part explains the coalition's lack of inhibition in pushing through public sector cuts and wage restraint.

It may now be the case that if you push hard enough, the chancellor will back-pedal. That has proved true for the police winning immunity from further cuts, and the anti-austerity movement more broadly in regard to tax credit reform. What is new, along with the small majority and Corbyn’s arrival, is that Osborne is auditioning for the top job. I suspect tax credit reform won’t be the last U-turn we’ll see between now and the next general election.