Tuesday, 9 September 2008

Tories drop public spending pledge

The Conservatives are dropping their pledge to match New Labour's spending targets during their first three years in office. As an article in the latest British Politics makes clear, if one looked at the small print, the pledge was never that unambiguous anyway and probably only applied up to 2011.

Nevertheless, this is a significant development. George Osborne argues that public spending cuts are necessary to raise in 'shocking' public borrowing. But with the Conservatives enjoying a big lead in the opinion polls, perhaps he feels that the time has now come to give something to Tory activists.

Health, education and international aid are exempt from the cuts, so it is quite difficult to see where the cuts are going to come from. It would be difficult for the Conservatives to cut spending on law and order and defence would presumably also be exempt, given that they seem to be even more assertive liberal internationalists than Labour. Transfer payments (pensions and benefits) are difficult to cut. Scrapping the identity card scheme may not bring immediate savings given the contracts that Labour has signed and cutting back on regional development agency spending would not yield that much.

Osborne is also worried out being outflanked by Vince Cable from the Lib Dems who has called for £20bn of public spending cuts to provide tax cuts for lower and middle-income families. This has not gone down too well with some Lib Dem activists, but Cable probably has a better sense of the political pulse than they do.

Osborne is also not going to push ahead with environmental charges or 'green taxes', arguing that they can too easily become stealth taxes.

Osborne's move does give Labour a possible line of criticism of the Conservatives, although he has tried to cover himself by exempting the most popular areas of public exoenditure.


Justin Greaves said...

Of course, the Conservatives won't be planning spending cuts as such (I assume?) but lower real term spending growth than Labour. Nevertheless, I agree it will be difficult to achieve - although Labour did have very tights spending plans (which they kept to)in their first couple of years in office. So perhaps it could be done, at least in the first couple of years of a Parliament when electoral pressures subside. My scepticism is whether Dave and 'Boy George' (as Dennis Skinner once called him, I believe) could achieve reductions in spending in the long term.

Wyn Grant said...

The Conservative view is that they need to reduce the public debt burden - and there is something in that giving fiscal laxity in good economic times. The pressures on the NHS are huge and cannot be accommodated readily with a low rate of growth in real spending.