Cameron delays his privatisation plan again

Plans to open up all public services to private providers are put on hold.

Tony Blair famously declared: "I can only go one way, I've not got a reverse gear". But as the coalition's first year taught us, David Cameron certainly has. The backlash over the government's NHS reforms means that Cameron's entire public service reform agenda is in doubt. His radical pledge to open up almost all of the public sector - bar national defence and the judiciary - to private and voluntary providers may never be implemented.

I noted earlier this month that the government's white paper on open services, which was due to published in the spring, had been delayed in the face of opposition from the Lib Dems and scepticism from the Treasury. At the time we were assured that the white paper would finally be published in mid-July. But Francis Maude, the minister responsible for the reforms, tells today's Times (£) that the paper now won't appear until the autumn.

It's not hard to see why Cameron has retreated again. The pledge to open up the NHS to "any willing provider" proved toxic for Andrew Lansley's reforms. The pledge to do the same for the entire public sector could inflict yet more damage on the Tory brand. As my colleague Rafael Behr observed in his column recently, "One fear at No 10 is that the public hears the words "Conservative reform" and understands "mass privatisation".

The government's inertia reflects a growing division between George Osborne and Steve Hilton on the pace of reform. Hilton, Cameron's chief strategist, is determined to push ahead with the reforms to prove that the government is in control of the policy agenda ("Everything must have changed by 2015," he once remarked. "Everything"). But Osborne, who is focused on securing a Tory majority in 2015, is more cautious and is desperate to avoid another politically damaging row. In an illuminating piece on the Hilton-Osborne relationship, the Times's Sam Coates notes that senior Tories suggest there is now a "50-50 chance" of an increasingly disillusioned Hilton leaving Downing Street within the next six months.

It's unlikely that the reforms will be abandoned altogether but rather, like Lansley's NHS plans, that they will survive in a diluted form. The Lib Dems, to their credit, are determined to avoid anything that resembles privatisation. The near-collapse of Southern Cross, the company responsible for 750 care homes, was a timely reminder of the limits of the market. But Tory MPs are only likely to see this as further evidence of Cameron's diminished ambition.

George Eaton is political editor of the New Statesman.

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Autumn Statement 2015: George Osborne abandons his target

How will George Osborne close the deficit after his U-Turns? Answer: he won't, of course. 

“Good governments U-Turn, and U-Turn frequently.” That’s Andrew Adonis’ maxim, and George Osborne borrowed heavily from him today, delivering two big U-Turns, on tax credits and on police funding. There will be no cuts to tax credits or to the police.

The Office for Budget Responsibility estimates that, in total, the government gave away £6.2 billion next year, more than half of which is the reverse to tax credits.

Osborne claims that he will still deliver his planned £12bn reduction in welfare. But, as I’ve written before, without cutting tax credits, it’s difficult to see how you can get £12bn out of the welfare bill. Here’s the OBR’s chart of welfare spending:

The government has already promised to protect child benefit and pension spending – in fact, it actually increased pensioner spending today. So all that’s left is tax credits. If the government is not going to cut them, where’s the £12bn come from?

A bit of clever accounting today got Osborne out of his hole. The Universal Credit, once it comes in in full, will replace tax credits anyway, allowing him to describe his U-Turn as a delay, not a full retreat. But the reality – as the Treasury has admitted privately for some time – is that the Universal Credit will never be wholly implemented. The pilot schemes – one of which, in Hammersmith, I have visited myself – are little more than Potemkin set-ups. Iain Duncan Smith’s Universal Credit will never be rolled out in full. The savings from switching from tax credits to Universal Credit will never materialise.

The £12bn is smaller, too, than it was this time last week. Instead of cutting £12bn from the welfare budget by 2017-8, the government will instead cut £12bn by the end of the parliament – a much smaller task.

That’s not to say that the cuts to departmental spending and welfare will be painless – far from it. Employment Support Allowance – what used to be called incapacity benefit and severe disablement benefit – will be cut down to the level of Jobseekers’ Allowance, while the government will erect further hurdles to claimants. Cuts to departmental spending will mean a further reduction in the numbers of public sector workers.  But it will be some way short of the reductions in welfare spending required to hit Osborne’s deficit reduction timetable.

So, where’s the money coming from? The answer is nowhere. What we'll instead get is five more years of the same: increasing household debt, austerity largely concentrated on the poorest, and yet more borrowing. As the last five years proved, the Conservatives don’t need to close the deficit to be re-elected. In fact, it may be that having the need to “finish the job” as a stick to beat Labour with actually helped the Tories in May. They have neither an economic imperative nor a political one to close the deficit. 

Stephen Bush is editor of the Staggers, the New Statesman’s political blog.