Osborne will need even-bigger cuts to stick to his plan

The Chancellor must find £48bn in extra spending cuts or tax rises to meet his main deficit target.

The Autumn Statement is now just over three weeks away and a sense of déjà vu hangs over the scene. In the run up to the same event last year it was plain that poor economic performance meant that the Office for Budget Responsibility (OBR) would be the bearer of bad news for the Chancellor. And so it is again.

After a grotty economic performance in 2011, last year’s Autumn Statement was always going to deliver bad news. The Chancellor announced the need for a £15bn reduction in overall spending by 2016-17 in order to meet the government’s fiscal mandate of eliminating the structural deficit in five years.

But that wasn’t the whole story. Much social security spending is driven by things beyond the government’s control: rising rents push up the housing benefit bill, and retiring baby boomers raise the overall cost of the basic state pension. So to constrain overall spending in the face of a rising benefits bill, the Treasury was implicitly seeking a further £11bn of savings. In total, the plan was then to find some £26bn in spending cuts – since tax rises weren’t part of the plan – by 2016-17 in order to achieve the government’s aims.

Unfortunately, this year things seem depressingly familiar. At the Budget, the OBR predicted that economic growth would be 0.8 per cent this year, but independent forecasters now think it will be more like a 0.3 per cent contraction. As a result, public borrowing is running 10 per cent above the OBR’s March forecast. None of this is great news, but it wouldn’t be so bad if the higher borrowing was a temporary reflection of the weakness in the economy that would resolve itself once things get back to normal. Unfortunately, the Social Market Foundation’s analysis – part of a joint report produced with the RSA yesterday - shows that this doesn’t seem to be the case. At least not according the models the OBR uses.  

Unemployment has been falling for most of this year. While that’s a good news story in itself, it implies that the economy may have moved closer to its capacity. But with less far to bounce back, a bigger chunk of this year’s £122bn underlying annual government borrowing will remain when output finally does reach its full capacity. And the only way to fill that hole is to close the gap between revenue and spending.

Our analysis, using the OBR methodology, suggests that getting the government’s Budget 2012 plans back on track would require a further £22bn of spending cuts or tax rises by 2017-18. The Chancellor has some room to ease up on his plans and still hit his mandate, but whatever way you look at it, the OBR’s models suggest that a lot more fiscal pain is on the way. Combined with the cuts already planned, the total size of the task after 2014 could be £48bn by 2017-18.

If the Chancellor sticks to his plan to keep taxes unchanged and cut £10.5bn from the social security budget, most of the work will be done by cuts in public services. That would require 11 per cent real-terms budget reductions in every department over the first three years of the next parliament. And if health, education and international development spending were to be protected, the impact elsewhere would rise to an eye-watering 23 per cent.

All of this would come on top of the spending squeeze that’s already underway and planned to run until 2015. The consequences of the eight years of cuts would be to decimate spending in some areas, with some departments over 40 per cent smaller once the public finances are back to balance.

It must be hoped that the OBR’s models are wrong in their implications and that the economy is in fact still some distance from its potential level. But if the OBR’s advice follows it past form, the news will be grim, requiring cuts that will run deep into next parliament. Against a background of four years’ unprecedented cuts, a further squeeze on anything like the scale implied by the SMF’s analysis will represent the central issue at the next election, forcing on the electorate stark decisions about the kind of public services we want in the UK.

But we mustn’t have a re-run of the 2010 election, in which the three parties connived in presenting vague plans and disingenuous language to mask the scale of the problem. Osborne made a bold decision in setting up the independent OBR. Perhaps, before the next election he should make another, and require it publicly to adjudicate on the detail and viability of each of the main parties’ plans. If the electorate is to choose, it must be informed.

Ian Mulheirn is director of the Social Market Foundation

George Osborne will deliver the Autumn Statement on 5 December. Photograph: Getty Images.

Ian Mulheirn is the director of the Social Market Foundation.

Getty
Show Hide image

In the 1980s, I went to a rally where Labour Party speakers shared the stage with men in balaclavas

The links between the Labour left and Irish republicanism are worth investigating.

A spat between Jeremy Corbyn’s henchfolk and Conor McGinn, the MP for St Helens North, caught my ear the other evening. McGinn was a guest on BBC Radio 4’s Westminster Hour, and he obligingly revisited the brouhaha for the listeners at home. Apparently, following an interview in May, in which McGinn called for Corbyn to “reach out beyond his comfort zone”, he was first threatened obliquely with the sack, then asked for a retraction (which he refused to give) and finally learned – from someone in the whips’ office – that his party leader was considering phoning up McGinn’s father to whip the errant whipper-in into line. On the programme, McGinn said: “The modus operandi that he [Corbyn] and the people around him were trying to do [sic], involving my family, was to isolate and ostracise me from them and from the community I am very proud to come from – which is an Irish nationalist community in south Armagh.”

Needless to say, the Labour leader’s office has continued to deny any such thing, but while we may nurture some suspicions about his behaviour, McGinn was also indulging in a little airbrushing when he described south Armagh as an “Irish ­nationalist community”. In the most recent elections, Newry and Armagh returned three Sinn Fein members to the Northern Ireland Assembly (as against one Social Democratic and Labour Party member) and one Sinn Fein MP to Westminster. When I last looked, Sinn Fein was still a republican, rather than a nationalist, party – something that McGinn should only be too well aware of, as the paternal hand that was putatively to have been lain on him belongs to Pat McGinn, the former Sinn Fein mayor of Newry and Armagh.

According to the Irish News, a “close friend” of the McGinns poured this cold water on the mini-conflagration: “Anybody who knows the McGinn family knows that Pat is very proud of Conor and that they remain very close.” The friend went on to opine: “He [Pat McGinn] found the whole notion of Corbyn phoning him totally ridiculous – as if Pat is going to criticise his son to save Jeremy Corbyn’s face. They would laugh about it were it not so sinister.”

“Sinister” does seem the mot juste. McGinn, Jr grew up in Bessbrook during the Troubles. I visited the village in the early 1990s on assignment. The skies were full of the chattering of British army Chinooks, and there were fake road signs in the hedgerows bearing pictograms of rifles and captioned: “Sniper at work”. South Armagh had been known for years as “bandit country”. There were army watchtowers standing sentinel in the dinky, green fields and checkpoints everywhere, manned by some of the thousands of the troops who had been deployed to fight what was, in effect, a low-level counter-insurgency war. Nationalist community, my foot.

What lies beneath the Corbyn-McGinn spat is the queered problematics of the ­relationship between the far left wing of the Labour Party and physical-force Irish republicanism. I also recall, during the hunger strikes of the early 1980s, going to a “Smash the H-Blocks” rally in Kilburn, north London, at which Labour Party speakers shared the stage with representatives from Sinn Fein, some of whom wore balaclavas and dark glasses to evade the telephoto lenses of the Met’s anti-terrorist squad.

The shape-shifting relationship between the “political wing” of the IRA and the men with sniper rifles in the south Armagh bocage was always of the essence of the conflict, allowing both sides a convenient fiction around which to posture publicly and privately negotiate. In choosing to appear on platforms with people who might or might not be terrorists, Labour leftists also sprinkled a little of their stardust on themselves: the “stardust” being the implication that they, too, under the right circumstances, might be capable of violence in pursuit of their political ends.

On the far right of British politics, Her Majesty’s Government and its apparatus are referred to derisively as “state”. There were various attempts in the 1970s and 1980s by far-right groupuscules to link up with the Ulster Freedom Fighters and other loyalist paramilitary organisations in their battle against “state”. All foundered on the obvious incompetence of the fascists. The situation on the far left was different. The socialist credentials of Sinn Fein/IRA were too threadbare for genuine expressions of solidarity, but there was a sort of tacit confidence-and-supply arrangement between these factions. The Labour far left provided the republicans with the confidence that, should an appropriately radical government be elected to Westminster, “state” would withdraw from Northern Ireland. What the republicans did for the mainland militants was to cloak them in their penumbra of darkness: without needing to call down on themselves the armed might of “state”, they could imply that they were willing to take it on, should the opportunity arise.

I don’t for a second believe that Corbyn was summoning up these ghosts of the insurrectionary dead when he either did or did not threaten to phone McGinn, Sr. But his supporters need to ask themselves what they’re getting into. Their leader, if he was to have remained true to the positions that he has espoused over many years, should have refused to sit as privy counsellor upon assuming his party office, and refused all the other mummery associated with the monarchical “state”. That he didn’t do so was surely a strategic decision. Such a position would make him utterly unelectable.

The snipers may not be at work in south Armagh just now – but there are rifles out there that could yet be dug up. I wouldn’t be surprised if some in Sinn Fein knew where they are, but one thing’s for certain: Corbyn hasn’t got a clue, bloody or otherwise. 

Will Self is an author and journalist. His books include Umbrella, Shark, The Book of Dave and The Butt. He writes the Madness of Crowds and Real Meals columns for the New Statesman.

This article first appeared in the 25 August 2016 issue of the New Statesman, Cameron: the legacy of a loser