Why Osborne's cuts aren't "soft"

The misleading claim that Osborne is only cutting spending by one per cent a year.

Supporters of George Osborne's economic strategy have made it their mission to convince the world that his cuts are not harsh, savage or draconian but are in fact "soft", "mild" and "insignificant". It's a smart tactic designed to make Labour's opposition to the cuts look hysterical and economically deluded.

The most prominent and articulate exponent of this view is Spectator editor Fraser Nelson. In a blog published yesterday, he wrote: "Osborne's cuts aren't harsh or drastic: they're mild and probably insufficient. There's almost no organisation on the planet that agrees with Balls that cuts of less than 1 per cent a year are too harsh and too fast -- he ends up looking like a loser."

Nelson's figures aren't wrong - Osborne really is cutting spending by just 0.6 per cent this year and by just 3.7 per cent across this Parliament. But they are deeply misleading. The figure for total cuts includes non-discretionary spending such as welfare benefits (the "automatic stabilisers" Osborne recently referred to) and debt interest, masking the true extent of the coaliton's squeeze on public services.

The Treasury table below, which looks at departmental spending in isolation, shows what all the fuss is about. The Home Office is being cut by 25 per cent (see the final column). Education is being cut by 11 per cent. Transport is being cut by 15 per cent. The Foreign Office is being cut by 28 per cent.

The total cut to departmental spending is 11 per cent, the largest, as the IFS has noted, since 1945. If we strip out the NHS and International Development - the ring-fenced departments - the total cut is 19 per cent.

I should add that higher inflation means that the cuts will be even worse. The NHS, for instance, which was due to receive a small real-terms increase, will now suffer a small real-terms cut (the reason why it was so foolish for Cameron to "guarantee" last week that spending would rise).

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Another tactic beloved of the right (most notably John Redwood) is to point out that spending, in defiance of Osborne's cuts, continues to rise. Gordon Brown's government spent £50.6bn in May 2010 but Cameron's splashed £54.1bn last month. What's more, the latest Treasury figures show that total state expenditure, which stood at £669.7bn in 2009-10, will be £743.6bn by 2014-15. The cuts are all in the left's head.

But the claim that the cuts are mythical is only achieved by the old trick of measuring public spending in cash terms, rather than as a percentage of GDP. The latter is by far the more sensible measure. At times of economic expansion, it is only reasonable to assume that some of the proceeds of growth will go towards improving public services, and public-sector inflation is typically higher than the average growth in prices.

If we look at public spending as a proportion of GDP, the true picture emerges. The cuts will reduce public spending from 47.6 per cent of GDP in 2010/11 to 41.0 per cent in 2014/15. For many on the right, this is still an unacceptably high level of expenditure. But one can hardly deny that it represents a substantial reduction in the scope and size of the state's activities.

Rather than hiding behind misleading figures, it would be more intellectually honest of the right to make the case for Osborne's cuts, red in tooth and claw. Once the coalition's squeeze is complete, their statistical conjury won't fool anyone.

George Eaton is political editor of the New Statesman.

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Why Labour's dismal poll ratings won't harm Jeremy Corbyn's re-election chances

Members didn't vote for him on electoral grounds and believe his opponents would fare no better.

On the day of Theresa May's coronation as Conservative leader, a Labour MP texted me: "Can you imagine how big the Tory lead will be?!" We need imagine no more. An ICM poll yesterday gave the Tories a 16-point lead over Labour, their biggest since October 2009, while YouGov put them 12 ahead. The latter showed that 2.7 million people who voted for the opposition in 2015 believe that Theresa May would make a better prime minister than Jeremy Corbyn (she leads among all voters by 52-18).

One might expect these subterranean ratings to reduce Corbyn's chances of victory in the Labour leadership contest. But any effect is likely to be negligible. Corbyn was not elected last summer because members regarded him as best-placed to win a general election (polling showed Andy Burnham ahead on that front) but because his views aligned with theirs on austerity, immigration and foreign policy. Some explicitly stated that they regarded the next election as lost in advance and thought it better to devote themselves to the long-term task of movement building (a sentiment that current polling will only encourage). Their backing for Corbyn was not conditional on improved performance among the public. The surge in party membership from 200,000 last year to 515,000 is far more worthy of note. 

To the extent to which electoral considerations influence their judgement, Corbyn's supporters do not blame the Labour leader for his party's parlous position. He inherited an outfit that had lost two general elections, neither on a hard-left policy platform. From the start, Corbyn has been opposed by the majority of Labour MPs; the latest polls follow 81 per cent voting no confidence in him. It is this disunity, rather than Corbyn's leadership, that many members regard as the cause of the party's malady. Alongside this, data is cherry picked in order to paint a more rosy picture. It was widely claimed yesterday that Labour was polling level with the Tories until the challenge against Corbyn. In reality, the party has trailed by an average of eight points this year, only matching he Conservatives in a sole Survation survey.

But it is Labour's disunity, rather than Corbyn, that most members hold responsible. MPs contend that division is necessary to ensure the selection of a more electable figure. The problem for them is that members believe they would do little, if any, better. A YouGov poll published on 19 July found that just 8 per cent believed Smith was "likely to lead Labour to victory at the next general election", compared to 24 per cent for Corbyn.

The former shadow work and pensions secretary hopes to eradicate this gap as the campaign progresses. He has made the claim that he combines Corbyn's radicalism with superior electability his defining offer. But as Burnham's fate showed, being seen as a winner is no guarantee of success. Despite his insistence to the contrary, many fear that Smith would too willingly trade principle for power. As YouGov's Marcus Roberts told me: "One of the big reasons candidates like Tessa Jowell and Andy Burnham struggled last summer was that they put too much emphasis on winning. When you say 'winning' to the PLP they think of landslides. But when you say 'winning' to today's membership they often think it implies some kind of moral compromise." When Corbyn supporters hear the words "Labour government" many think first of the Iraq war, top-up fees and privatisation, rather than the minimum wage, tax credits and public sector investment.

It was the overwhelming desire for a break with the politics of New Labour that delivered Corbyn victory. It is the fear of its return that ensures his survival. The hitherto low-profile Smith was swiftly framed by his opponents as a Big Pharma lobbyist (he was formerly Pfizer's head of policy) and an NHS privatiser (he suggested in 2006 that firms could provide “valuable services”). His decision to make Trident renewal and patriotism dividing lines with Corbyn are unlikely to help him overcome this disadvantage (though he belatedly unveiled 20 left-wing policies this morning).

Short of Corbyn dramatically reneging on his life-long stances, it is hard to conceive of circumstances in which the current Labour selectorate would turn against him. For this reason, if you want to predict the outcome, the polls are not the place to look.

George Eaton is political editor of the New Statesman.