Liberal Democrat Chief Secretary to the Treasury David Laws is a former banker and as dry as they come in economic terms. He is in effect the Govermment's axeman and he makes it clear in the Financial Times this morning that he won't be afraid to use his axe, using the austerity word that was taboo in the election. He also made it clear that he will be sensitive in seeking to protect vital services.
The problem is that the Coalition Government doesn't have a lot of room for manoeuvre. They have said that NHS spending will increase in real times: in practice this means cutbacks given an ageing population and advances in medical technology. They are seeking to protect spending on schools.
Various perks for pensioners such as the winter fuel allowance and free bus passes will be retained, even though the recipients are often still in work or well off. What's more pensions in future will go up in terms of either inflation or earnings, whichever is greater, or by 2.5 per cent as a minimum. Transfer payments like this cost huge amounts of money and increasing the retirement age to reflect the fact that people live longer has been postponed well into the future.
So other aspects of public services will have to take a big hit. There will have to be a bonfire of quangos and some of the monitoring ones set up by New Labour will be no great loss. Others deliver important regulatory or scientific services, e.g., FERA which I visited on Thursday.
Higher education is likely to take a big hit, but the Lib Dems are reluctant to allow universities to raise the fees they charge to home students.
Some people I encounter don't seem to be facing up to the new reality. They are burying their heads in the sand or recognising that they will have to be made pure, but not just yet. Well, cuts are going to start impacting services near you before long. That's when we can expect political trouble. The structural budget deficit has to be reduced but it's difficult given the number of sacred cows there are.