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George Osborne is a magician

Think about the greats – Houdini, David Copperfield an er.. Paul Daniels – and they all share the same attributes as the Chancellor.

Firstly, misdirection. This is the rabbit out of the hat he has pulled in his last two economic statements that has buried all negative news.

In the autumn statement last week the Treasury unveiled “colossal” cuts to come in the next parliament.

These cuts are a brutal reminder of the Government’s utter failure to deliver on its central promise to eliminate the deficit by 2015.

Never mind, Osborne unveiled an £800m misdirection with an early Christmas present to homebuyers in the form of radical overhaul of stamp duty.

It’s all any normal person can talk about. Sure, the nerds at the IFS are concerned about the brutal cuts to come but if you’re buying a home then who cares, you’re saving buckets of cash right now!

Ta da.

Secondly, the best magicians are illusionists. Osborne has created the illusion that huge changes to pensions and housing are free with guaranteed benefits when they are anything but.

To be fair, he has been handed two massive constraints faced by no other Chancellor in 100 years – the need for massive spending cuts and a coalition.

It has meant huge compromise with the Lib Dems and an unparalleled fiscal straight jacket. He has needed all his magical skills to create popular policies without huge spending.

Osborne comes up with “fiscally neutral” ways of dishing out goodies.

In March he unveiled radical reform of private pensions allowing over-55s massive flexibility over withdrawals over pots.

The Treasury is touting it as a net gain to the public purse but the OBR says estimates are very uncertain. There are massive concerns about whether pots will be spent too quickly and how much tax avoidance it will create.

A similar case could be made for stamp duty reform, unveiled last week, as Treasury officials have always been nervous about huge changes potentially cutting the cash cow the housing transaction tax provides.

Will housing transactions slow dramatically over £2m now there is a 12 per cent stamp duty charge? The Treasury is now massively reliant on a small sector of high net worth deals. If this relatively tiny pool of transactions slows then revenues will fall rapidly. It’s undoubtedly a riskier system for bringing in tax.

The same could be said for Help to Buy loading huge risks on to Treasury balance sheets but superficially free.

There are big uncertainties but policies are presented as huge rewards for no risk and very little cost. It’s an illusion.

Ta da.

The final way Osborne is a magician is perhaps the most important for him. Some suggest he is a genius political strategist with carefully crafted policies to sweep up votes.

Maybe, and there is certainly more popular middle income and financial planning policies to come. Could we see the complete abolition of inheritance tax appear in the Tory manifesto?

But the truth is that Osborne’s most magical feature of all is his ability to deliver almost universally popular policies for targeted voter groups supported by industry, consumer bodies, advisers and voters but still remain unpopular.

Since he announced his pension reforms in March partly to head off Ukip – met with delight by Britain’s most important voting demographic, the over-65s – two Tory MPs have defected and Nigel Farage is more popular than ever.

The current polls put Labour on course to be the largest party next May.

This could easily change in such a fluid political environment but despite his masterful policy tricks, the audience are still planning to boo Osborne’s magical show off the stage.

Ta da.

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