Alistair Darling did George Osborne a big favour yesterday, though his likely successor will probably not see it that way. The Pre-Budget Report highlighted continued growth in favoured spending programmes, such as schools, health and the police, but failed to say where spending will be cut, except in the most general terms. Mr Darling has not accelerated the gradual path for deficit reduction set out in the Budget, which will take more than five years to stabilise public debt.
That adds up to a grim inheritance for any government, so that next June’s Budget and the post-election spending review are certain to involve much more pain.
However, while Mr Darling’s measures were insufficient, his strategy has made deficit reduction common ground across the party divide. That is where he has done Mr Osborne a favour. The Chancellor has legitimised tough action to cut the deficit. The three main parties accept this goal; the differences are on timing, about whether recovery will be threatened by early cuts.
There is a parallel with the late 1970s when the shift towards what became known as monetarism was reluctantly initiated by the Labour Government. The first brakes on public spending growth — “the party’s over” as Tony Crosland told local councils — were applied in 1976, when monetary targets were also unveiled. This was far from a wholehearted conversion, either by Labour ministers or by the Treasury, but it paved the way for the tougher policies brought in after 1979 by Geoffrey Howe and Nigel Lawson. As Tony Benn complained, the Callaghan Government made it easier for the Thatcher administration to go down the monetarist path.
Similarly, agreement on the goal of deficit reduction now — even if not the means — should strengthen Mr Osborne’s case for tougher measures after the election. Yesterday he criticised the absence of a credible plan to deal with the deficit.
Senior civil servants privately accept that many of the proposals outlined this week can easily be accepted, and pocketed, by the Opposition. It is irrelevant which party proposed which initiative; what matters is the common underlying approach.
So life will be tough for the public sector with likely cuts in pay in real terms, a modest reduction in pensions, cuts in quangos and squeezes on administrative budgets. The universities will also protest over £600 million of unspecified savings from higher education and science and research budgets.
But these measures will be just a start if an incoming Conservative government decides on a much faster path of deficit reduction than halving over four years — and if it scraps some of Labour’s proposals and takes offsetting measures.
In political terms, Mr Darling’s package is intended to rally Labour’s traditional voters by attacking the Tories for favouring the better-off and for cutting frontline services, while boosting the incomes of those on benefits. That is a defensive electoral strategy. It is hard to see it winning back many wavering voters.
Sourced via timesonline.co.uk