New UK finance minister picks up poisoned chalice

By Sumeet Desai

LONDON (BestGrowthStock) – George Osborne became Britain’s youngest chancellor of the exchequer in 120 years on Tuesday. Some commentators say he may soon be the most hated in at least as long.

As the new Conservative finance minister, it will be Osborne’s task to implement the most savage spending cuts in a generation, to bring down a budget deficit of close to 12 percent of GDP, similar in scale to that of crisis-hit Greece.

Tax rises may also be on the way if Britain is to keep its triple-A credit rating, even as the country recovers from the worst recession since the Second World War.

The governor of the Bank of England was reported as saying that whichever party won Thursday’s election would end up being out of power for a generation — so harsh would austerity measures be.

Osborne, who takes over at the Treasury after 13 years of Labour rule, has promised an emergency budget within 50 days and a full-scale spending review later in the year. Many ministries could see their budgets slashed by a quarter.

At 38, Osborne is the youngest chancellor since Randolph Churchill in 1886 and has been in politics almost all his working life, joining Conservative Central Office shortly after university. He became a member of parliament for Tatton in 2001.

Labour has made much of his youth, nicknaming him “Boy George,” and even more of his privileged background — he is the heir to Sir Peter Osborne, 17th baronet and co-founder of home furnishing business Osborne and Little.

Polls by Reuters last month showed that many City economists and businessmen have their own doubts about Osborne’s skills, saying they would prefer Ken Clarke, the finance minister in the pre-1997 Conservative administration, instead.

BULLINGDON BOYS

But Osborne has the support of Conservative leader David Cameron and is a key member of the Notting Hill set, so called after the fashionable area of West London where many of them live, that started the party’s modernization in 2005.

As election coordinator, Osborne can also take credit for the party being back in power. Critics might say the Conservatives were sure of a commanding lead a year ago but are short of a majority in parliament and cannot govern alone.

In either case, Osborne’s masterstroke was his pledge to cut inheritance tax in October 2007. The move rattled then-prime minister Gordon Brown and stopped him from calling a snap election then, which he probably would have won.

Originally named Gideon, Osborne changed his name to George when he was 13 and was educated at the exclusive St Paul’s School in London.

He studied history at Oxford University, where, like Cameron and London mayor Boris Johnson, Osborne was a member of the elite Bullingdon Club, whose wealthy members were infamous for going on drinking binges and smashing up restaurants.

Perhaps the lowest point in Osborne’s career came in late 2008 after a public falling-out with fellow former Bullingdon member Nathan Rothschild.

The financier and scion of the famous banking dynasty claimed that Osborne had tried to solicit 50,000 pounds in donations from Russian oligarch Oleg Deripaska for the Conservative Party while on holiday in Corfu in August 2008.

It is illegal for people not on the UK’s electoral roll to make a donation to a UK political party. Osborne denied the charge but admitted he had made a mistake in his handlings of meetings with the Russian billionaire.

Once more than 20 points ahead in the polls of Labour, the Conservatives did not win enough seats to form a majority government and have established a coalition with the center-left Liberal Democrats.

The Lib Dem Treasury spokesman Vince Cable is expected to work under Osborne as chief secretary to the Treasury.

Coalition government may make the fiscal adjustment to come all the harder. In the run-up to the election the Conservatives and Liberal Democrats sharply differed on the pace of deficit reduction.

Osborne wanted to start immediately. Cable wanted to wait. The markets will want to see who wins.

Money

New UK finance minister picks up poisoned chalice