UK's Osborne safe for now despite talk of downfall

LONDON Mon Jul 23, 2012 2:32pm EDT

Britain's Chancellor of the Exchequer George Osborne arrives at a European Union finance ministers meeting in Luxembourg June 22, 2012. REUTERS/Francois Lenoir

Britain's Chancellor of the Exchequer George Osborne arrives at a European Union finance ministers meeting in Luxembourg June 22, 2012.

Credit: Reuters/Francois Lenoir

LONDON (Reuters) - Polls suggest George Osborne is one of Britain's least popular finance ministers, but fellow Conservatives say it would make no sense to sack one of the masterminds of their coalition government.

After a slide back into recession and a poorly communicated budget in March which appeared to make the poor and elderly pay for a tax cut for the rich, the Chancellor of the Exchequer has faced his toughest period since taking office in 2010.

"There is already speculation in Whitehall circles that Osborne will not continue as Chancellor for much longer," Monument Securities economist Stephen Lewis said in a note to clients, reflecting concern in financial markets as well as Westminster.

The millionaire heir to an Irish baronetcy has struggled to convince as the salesman of austerity cuts to ordinary British voters.

He has also irritated some senior Conservatives. Former chancellor Nigel Lawson last week suggested Osborne should spend more time concentrating on the economy and give up the distraction of his second job as senior political strategist for the Conservatives.

A YouGov poll for the Sunday Times showed just 15 percent of voters thought Osborne was doing a good job. Only one in five say Prime Minister David Cameron should keep his right-hand man, a result echoed in a Sunday Mirror/Independent on Sunday poll by Comres.

"George has lost his aura of being the political supremo," said one senior Conservative lawmaker. "So there is a confidence issue, but not sufficient enough to be considered a revolutionary issue."

"Nobody is going to go to war to have George Osborne replaced ... Losing chancellors is not a good idea mid-term."

Ministers and government officials also dismiss talk of Osborne's imminent departure, arguing it would throw the government's economic policy into chaos and could put Britain's credit rating at risk.

"You don't become chancellor because you want to be Mr. Popular ... George Osborne has been one of the bravest chancellors in history," Culture Secretary Jeremy Hunt told Sky television.

LIGHTNING CONDUCTOR

Government insiders say replacing Osborne after just over two years in the job would amount to an admission of failure in the Conservative's austerity policies - the bedrock of their 2010 election campaign.

There are also logistical concerns. New ministers can take several months to get used to a new brief - hardly ideal during an economic crisis.

However, talk of Osborne's demise is likely to linger as long as the economy fares badly and austerity targets slip.

Economists doubt whether he will meet his borrowing target for the fiscal year 2012-13, having admitted his austerity plan would bite for seven years - two years longer than the Conservatives promised.

Figures on Wednesday are expected to show a further economic slump, marking a third quarter of contraction.

Some of the country's woes are caused by the euro zone debt crisis, but the pressure on the finance minister to get the economy growing is rising.

"He's just becoming a lightning conductor for the problems of the country," said Robert Halfon, a Conservative lawmaker and member of the party's influential backbench 1922 Committee.

"I think it is being talked up by one or two people, I don't think it is as widespread as you think."

(Editing by Andrew Heavens)

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