Here’s why Osborne will have to raise taxes

Get ready for tax rises as “efficiency savings” of £35bn fail to materialise.

With the coalition still planning to cut all non-ring-fenced departments (that's everything except Health and International Development) by 25 per cent, this morning's report by the National Audit Office should serve as a wake-up call.

First, it found that Whitehall departments are almost certain to fail to make the £35bn of efficiency savings promised by the last Labour government back in 2007.

Second, it found that, of the £10.8bn in savings already reported by the government, many are unsustainable. After reviewing around £2.8bn of the total, it found that only 38 per cent "represented sustainable savings", with 44 per cent rated as "uncertain" and 18 per cent as non-existent.

These figures are highly significant because the Conservatives' pledge to cancel the planned rise in National Insurance assumed not only that Whitehall would save £35bn, but that the Tories could save £12bn on top of this.

The government will undoubtedly portray this as an indictment of the Brown years but here's the rub: if Whitehall fails to cut spending by £35bn (around 3 per cent of departmental spending) how will it ever meet George Osborne's target of 25 per cent cuts?

The likelihood, as Michael Portillo, once chief secretary to the Treasury, has argued, is that it won't. Theoretical savings often fail to materialise in practice and the civil service is notoriously astute at protecting departmental budgets and evading cuts.

What this implies is more tax rises. Like Portillo, I am highly sceptical that Osborne will maintain his plan to reduce the deficit through a 77:23 ratio of spending cuts to tax rises. The coalition may be forced revert to something like the 50:50 split adopted by Kenneth Clarke during the last major period of fiscal retrenchment in the 1990s.

Still, one veteran minister has apparently had no trouble identifying cuts of 40 per cent. Here's what he told Benedict Brogan:

Oh, that was easy. I just threw in plenty of programmes for children and vulnerable people. That should give them something to think about. I wasn't born yesterday. If that's how they want to play this game . . .

George Eaton is political editor of the New Statesman.

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Why the Psychoactive Substances Act is much better than anyone will admit

Under the Psychoactive Substances Act it will not be a criminal offence for someone to possess for their own consumption recreational drugs too dangerous to be legally sold to the public.

From Thursday, it may be illegal for churches to use incense. They should be safe from prosecution though, because, as the policing minister was forced to clarify, the mind-altering effects of holy smells aren’t the intended target of the Psychoactive Substances Act, which comes into force this week.

Incense-wafters aren’t the only ones wondering whether they will be criminalised by the Act. Its loose definition of psychoactive substances has been ridiculed for apparently banning, among other things, flowers, perfume and vaping.

Anyone writing about drugs can save time by creating a shortcut to insert the words “the government has ignored its advisors” and this Act was no exception. The advisory council repeatedly warned the government that its definition would both ban things that it didn’t mean to prohibit and could, at the same time, be unenforcable. You can guess how much difference these interventions made.

But, bad though the definition is – not a small problem when the entire law rests on it – the Act is actually much better than is usually admitted.

Under the law, it will not be a criminal offence for someone to possess, for their own consumption, recreational drugs that are considered too dangerous to be legally sold to the public.

That sounds like a mess, and it is. But it’s a mess that many reformers have long advocated for other drugs. Portugal decriminalised drug possession in 2001 while keeping supply illegal, and its approach is well-regarded by reformers, including the Liberal Democrats, who pledged to adopt this model in their last manifesto.

This fudge is the best option out of what was politically possible for dealing with what, until this week, were called legal highs.

Before the Act, high-street shops were free to display new drugs in their windows. With 335 head shops in the UK, the drugs were visible in everyday places – giving the impression that they couldn’t be that dangerous. As far as the data can be trusted, it’s likely that dozens of people are now dying each year after taking the drugs.

Since legal highs were being openly sold and people were thought to be dying from them, it was obvious that the government would have to act. Until it did, every death would be blamed on its inaction, even if the death rate for users of some newly banned drugs may be lower than it is for those who take part in still-legal activities like football. The only question was what the government would do.

The most exciting option would have been for it to incentivise manufacturers to come up with mind-altering drugs that are safe to take. New Zealand is allowing drug makers to run trials of psychoactive drugs, which could eventually – if proved safe enough – be sold legally. One day, this might change the world of drug-taking, but this kind of excitement was never going to appeal to Theresa May’s Home Office.

What was far more plausible was that the government would decide to treat new drugs like old ones. Just as anyone caught with cocaine or ecstasy faces a criminal record, so users of new drugs could have been hit with the same. This was how legal highs have been treated up until now when one was considered serious enough to require a ban.

But instead, the government has recognised that its aim – getting new drugs out of high-street shop windows so they don’t seem so normal – didn’t depend on criminalising users. A similar law in Ireland achieved precisely this. To its credit, the government realised it would be disproportionate to make it a criminal offence to possess the now-illegal highs.

The reality of the law will look chaotic. Users will still be able to buy new drugs online – which could open them to prosecution for import – and the law will do nothing to make drugs any safer. Some users might now be exposed to dealers who also want to sell them more dangerous other drugs. There will be few prosecutions and some head shop owners might try to pick holes in the law: the government seems to have recognised that it needed a better definition to have any chance of making the law stick.

But, most importantly for those of us who think the UK’s drug laws should be better at reducing the damage drugs cause, the government, for the first time, has decided that a class of recreational drugs are too dangerous to be sold but that it shouldn’t be a crime to possess them. The pressure on the government to act on legal highs has been relieved, without ordinary users being criminalised. For all the problems with the new law, it’s a step in the right direction.

Leo Barasi is a former Head of Communications at the UK Drug Policy Commission. He writes in a personal capacity