Why the coalition will struggle to make its cuts

Osborne will have to raise taxes or slash front-line services as “efficiency savings” of £35bn fail

Since last month's Spending Review, political attention has focused on the fairness (or otherwise) of the cuts and the likely effect on the economic recovery. Remarkably little thought has been given to another pressing question: how hard will the cuts be to implement?

Today's report from the Commons public accounts committee attempts to fill this void – and the outlook for the coalition isn't good.

The report warns that only £15bn of the £35bn of savings identified in the 2007 Spending Review have been achieved, and just 38 per cent of those were considered "legitimate value-for-money savings". The Communities department, for instance, which faces cuts of 51 per cent – the largest of any department – has made only £40m of savings against a target of £987m.

Some will undoubtedly portray this as an indictment of the Brown years, but here's the rub: if Whitehall fails to cut spending by £35bn (roughly 3 per cent of departmental spending) how will it ever meet George Osborne's target of £81bn? Faced with this conundrum, Labour MPs fear the coalition will resort to slashing front-line services to reduce costs.

Michael Portillo, once chief secretary to the Treasury, warned Osborne back in July that theoretical savings often fail to materialise in practice. He suggested that the coalition would have to raise considerably more through taxation. After all, during the last significant period of fiscal retrenchment in the 1990s, Ken Clarke split the pain 50:50 between tax rises and spending cuts.

Higher taxes or higher cuts? That is the unpalatable choice facing Osborne.

George Eaton is political editor of the New Statesman.

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How Theresa May laid a trap for herself on the immigration target

When Home Secretary, she insisted on keeping foreign students in the figures – causing a headache for herself today.

When Home Secretary, Theresa May insisted that foreign students should continue to be counted in the overall immigration figures. Some cabinet colleagues, including then Business Secretary Vince Cable and Chancellor George Osborne wanted to reverse this. It was economically illiterate. Current ministers, like the Foreign Secretary Boris Johnson, Chancellor Philip Hammond and Home Secretary Amber Rudd, also want foreign students exempted from the total.

David Cameron’s government aimed to cut immigration figures – including overseas students in that aim meant trying to limit one of the UK’s crucial financial resources. They are worth £25bn to the UK economy, and their fees make up 14 per cent of total university income. And the impact is not just financial – welcoming foreign students is diplomatically and culturally key to Britain’s reputation and its relationship with the rest of the world too. Even more important now Brexit is on its way.

But they stayed in the figures – a situation that, along with counterproductive visa restrictions also introduced by May’s old department, put a lot of foreign students off studying here. For example, there has been a 44 per cent decrease in the number of Indian students coming to Britain to study in the last five years.

Now May’s stubbornness on the migration figures appears to have caught up with her. The Times has revealed that the Prime Minister is ready to “soften her longstanding opposition to taking foreign students out of immigration totals”. It reports that she will offer to change the way the numbers are calculated.

Why the u-turn? No 10 says the concession is to ensure the Higher and Research Bill, key university legislation, can pass due to a Lords amendment urging the government not to count students as “long-term migrants” for “public policy purposes”.

But it will also be a factor in May’s manifesto pledge (and continuation of Cameron’s promise) to cut immigration to the “tens of thousands”. Until today, ministers had been unclear about whether this would be in the manifesto.

Now her u-turn on student figures is being seized upon by opposition parties as “massaging” the migration figures to meet her target. An accusation for which May only has herself, and her steadfast politicising of immigration, to blame.

Anoosh Chakelian is senior writer at the New Statesman.

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