Osborne Boom

The Osborne Boom was the macroeconomic conditions prevailing in the United Kingdom at the end of the 2010s, which became associated with the policies of David Cameron's Chancellor of the Exchequer, George Osborne.

The term Lawson Boom was used by analogy with the phrase "The Barber Boom", an earlier period of rapid expansion under the tenure as chancellor of Anthony Barber in the Conservative government of Edward Heath, and the "Lawson Boom" of Nigel Lawson under Margaret Thatcher's Conservative government.



The boom in question is largely considered to have originated from the tax cuts introduced by George Osborne in the October 2015 budget, which was largely a response to the continued deflation the UK economy had been experiencing at the time. Despite the strong pound (which traded at a peak of $1.92 and €1.58 on 8 May 2015), Osborne and many economists feared that the continued fall in prices would result in a deflationary spiral. As such, Osborne moved to cut taxes in the hopes of stimulating consumer spending and investment. The budget cut the rate of corporation tax from 19% to just 14%, the top rate of income tax from 45% to 42% and the basic rate of income tax from 20% to 18%. In the days immediately following the budget, Osborne's approval rating as Chancellor jumped from +4% to +21%. Addressing concerns that the cuts would increase the deficit and thus necessitate more decreases in public services, Osborne asserted that they would "essentially pay for themselves".

Throughout 2016, 2017 and 2018, economic growth increased dramatically, from just under 2% in 2015, to above 6% by 2018, eventually reaching a peak of 7.5% in 2019, making the UK the fastest-growing economy in the G7. Real incomes also rose rapidly, with the increase from 2016 to 2017 being a record 7.3%. The tax-to-GDP proportion fell from around 32% in 2015 to 28.7% in 2019. By 2018, Osborne's personal approval rating was at a record high of +59%. However, this was also accompanied by a rapid increase in inflation, from a low of -1% in early 2014, to 5.2% by mid-2018, the fastest inflation since 1992. The pound's value also fell dramatically, to just $1.41 and €1.26 in 2018, although it recovered to $1.49 and €1.31 in May 2019 after the defeat of Labour leader Jeremy Corbyn in the general election. In response, The Economist issued an article critical of Osborne, asserting that "the speed nor scale of the inflation was completely unexpected by the Chancellor".



Criticism
Critics of the Osborne boom have often cited the fact that, despite the rapid rise in incomes, the fastest increases were for those with already high wealth, with the lowest quartile actually seeing a real-term fall in living standards. As such, income inequality rose dramatically during the Osborne Boom, which Leader of the Opposition Jeremy Corbyn often used to attack Osborne during Prime Minister's Questions. In addition to this, the assertion that the tax cuts would "essentially pay for themselves" seemingly never came to fruition, with the deficit increasing from just £10.4 bn in the first quarter of 2015, to £67.8 bn in the third quarter of 2019. A number of Conservative figures, including former Chancellor Kenneth Clarke afterwards called the extent and speed of the tax cuts to be "irresponsible" in an open letter to Osborne. The Financial Times claimed that the excessive speculation and malinvestment resulting from the boom would cause a crash in the early 2020s or sooner, citing the slowdown in mid-2019, and advised the Bank of England to raise interest rates to stop the economy from "overheating".