Wednesday, October 01, 2014

Always jam tomorrow

Cameron's speech to close the Tory conference today was a decent one, although he is hardly an orator to match his predecessors. It has received a better press than it deserves, although you can hardly blame the Tory faithful for clutching at any straw as the chance of a Tory majority in 2015 sinks below the horizon. It was not the Gettysburg Address or JFK's inaugural.

The centrepiece promise of tax cuts in the next parliament was an example of chutzpah of the highest order.

Remember that Cameron promised to end the deficit by 2015 - a target that will be missed. He promised a rebalanced economy - but we now have growth based on a revival of the volatile services sector and one far too focussed on the South East and London. We'll set aside the pre-election rejection of a VAT rise or the many other broken promises.

Today, he made another promise - that sometime in the 2018 fiscal year (just in time for the run up to the 2020 election) - he will be able to deliver hefty (and non-progressive) tax cuts. The IFS clearly demonstrate that these tax cuts will benefit the wealthy significantly more than those less fortunate - 69% of the cut will go to benefit those in the top half of incomes, with just 15% going to those in the lowest income groups.

The value of this tax giveaway is worth some £12 billion according to the IFS, although the Tories reckon on £7 billion a year - perhaps suggesting that they don't think it will actually be that transformative.

But all of this comes with a cost. They have been clear that they won't seek to raise taxes, but to reduce public spending. This isn't about tackling the deficit, but going beyond that into surplus. As we know that Osborne and IDS plan to continue their attack on the poor (well, someone has to pay the price and the poor are easy targets), social security will continue to be eroded.

The NHS budget looks set to be maintained, so the cuts are going to have to fall on other departments. If you start protecting education and overseas aid as well, that would suggest cuts of around 30% could have to be delivered. The government have been touting a figure of 3% as an amount to be cut, but that's based on total government spend and an awful lot of spending lines are committed or protected. Including these tax cuts, Osborne and Cameron are going to be seeking about £50 billion of spending cuts to bring the surplus required.

From where I sit, a lot will depend on the strength of the Secretary of State and the department. I'd expect Defence to put up a good argument for no further cuts - the military can't really be expected to be combat ready with any further reduction in spending. On past form, Eric Pickles will only too happily offer up councils to take a share of the cuts and that terrifies me - and it should worry you. Putting money back into the pockets of those with the broadest shoulders not only means that the poorest will suffer unfair cuts in income, but that the services on which they depend will also take a kicking.

What is perhaps even more surprising is that the Tories have welcomed these unfunded commitments. Only a few weeks ago, the Tory parrots were out in force:
Karl McCartney MP has condemned Labour’s pledges over the summer for £21 billion more unfunded, inefficient and ineffective spending. New analysis has revealed this would cost working households £1,235 each – totalling a cost of £1.5 billion for working households across the East Midlands. This would all have to be paid for by higher taxes or more borrowing, making hardworking taxpayers, and future generations, worse off.
He was joined by Gavin Williamson MP, candidate Spencer Drury, even Aidan Burley took a break from organising stag parties to repost the CCHQ line.

So these are unfunded cuts

No comments: