Three things to bear in mind when watching Osborne today

Why everyone’s pretty much making it up.

1. Most of today’s cuts were decided three years ago In his statement today, the Chancellor needs to find cuts in most unprotected departments of around 8-9 per cent. That number flows mainly from three things: the pace of deficit reduction; the decision to protect health, schools, international development and pensioners; and forecasts for so-called Annually Managed Expenditure (AME). All three are either old news or else significantly beyond Osborne’s direct control. That’s not to say that today’s decisions don’t matter. Some departments will get more or less than 8-9 per cent—if briefings are right, local government will lose 10 per cent, meaning fewer cuts elsewhere. But these are relatively small movements around a big number that flows from existing plans.

2. Today’s cuts will hurt but things are set to get tougher The Chancellor will be pleased at the lack of blood on Whitehall carpets today. Tough settlements have been reached and coalition relationships have held up well. Even with no extra benefit cuts being announced in his statement, Osborne has also succeeded in baking in a tough settlement on welfare.

Yet the cuts needed to finish the job in 2016-17 and 2017-18 will mean much tougher battles. This is partly a question of scale. The Chancellor needs a further £13bn in both 2016-17 and 2017-18 on top of today’s cuts in order to meet his deficit targets. Without further tax rises or welfare cuts, that means speeding up departmental cuts by around 50 per cent after the election. Even keeping departmental cuts to their current pace would require £10bn of further tax rises or welfare cuts. But the battles will also get tougher for the simple reason that every fresh pound of cuts will be harder than the last. As things stand, 2016-17 and 2017-18 could leave departments like Defence and the Home Office a third smaller than they were in 2010. The last mile will be the hardest.

3. Everyone’s pretty much making it up Having said all of this, the most important thing today is to treat everything you hear with a big dose of scepticism. The level of uncertainty surrounding the Chancellor’s strategy is enormous. This is because the main figure guiding the cuts is the pledge to eliminate the structural deficit, the part of the deficit that won’t go away when the economy’s running at full capacity. Needless to say, that’s an incredibly hard thing to know. Far from being an academic point, these estimates about the size of the so-called ‘output gap’ change everything. Last year, two plausible estimates suggested that the Chancellor either needed to make £22bn of extra cuts by 2017-18 or else needed to make £35bn fewer cuts than planned. That’s a difference of £57bn. Bear it in mind when you hear confident statements today for or against £11.5bn of new cuts.

George Osborne during a visit to a branch of Lloyds TSB bank on June 19, 2013 in London. Photograph: Getty Images.

James Plunkett is director of policy and development at the Resolution Foundation

Photo: Getty
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Ignored by the media, the Liberal Democrats are experiencing a revival

The crushed Liberals are doing particularly well in areas that voted Conservative in 2015 - and Remain in 2016. 

The Liberal Democrats had another good night last night, making big gains in by-elections. They won Adeyfield West, a seat they have never held in Dacorum, with a massive swing. They were up by close to the 20 points in the Derby seat of Allestree, beating Labour into second place. And they won a seat in the Cotswolds, which borders the vacant seat of Witney.

It’s worth noting that they also went backwards in a safe Labour ward in Blackpool and a safe Conservative seat in Northamptonshire.  But the overall pattern is clear, and it’s not merely confined to last night: the Liberal Democrats are enjoying a mini-revival, particularly in the south-east.

Of course, it doesn’t appear to be making itself felt in the Liberal Democrats’ poll share. “After Corbyn's election,” my colleague George tweeted recently, “Some predicted Lib Dems would rise like Lazarus. But poll ratings still stuck at 8 per cent.” Prior to the local elections, I was pessimistic that the so-called Liberal Democrat fightback could make itself felt at a national contest, when the party would have to fight on multiple fronts.

But the local elections – the first time since 1968 when every part of the mainland United Kingdom has had a vote on outside of a general election – proved that completely wrong. They  picked up 30 seats across England, though they had something of a nightmare in Stockport, and were reduced to just one seat in the Welsh Assembly. Their woes continued in Scotland, however, where they slipped to fifth place. They were even back to the third place had those votes been replicated on a national scale.

Polling has always been somewhat unkind to the Liberal Democrats outside of election campaigns, as the party has a low profile, particularly now it has just eight MPs. What appears to be happening at local by-elections and my expectation may be repeated at a general election is that when voters are presented with the option of a Liberal Democrat at the ballot box they find the idea surprisingly appealing.

Added to that, the Liberal Democrats’ happiest hunting grounds are clearly affluent, Conservative-leaning areas that voted for Remain in the referendum. All of which makes their hopes of a good second place in Witney – and a good night in the 2017 county councils – look rather less farfetched than you might expect. 

Stephen Bush is special correspondent at the New Statesman. He usually writes about politics.