What will you cut next, Mr Osborne?

The Tories' plans mean that tax giveaways can only be funded by even deeper cuts somewhere else. Labour should take a different path.

George Osborne’s speech did little to answer the question that is at the heart of the Tories’ plans for the next election: what will be cut next? The conference has opened with news of mortgage guarantees, tax giveaways and the introduction of a new 'Help to Work' programme, but this week’s announcements will be dwarfed in scale by the spending plans the government has already published earlier in the year, which promise a further £24bn of cuts in 2016 and 2017.

The Fabian Society’s commission on future spending choices has examined the impact these plans might have. We found that if all the cuts were levied on day-to-day public service spending, department budgets would fall by 8 per cent over two years. In principle these cuts could be spread thinly between public services, but continued protection for the NHS and schools is more likely. If all the areas George Osborne protected in this summer’s spending round were safeguarded again, on average, other public services would see their budgets fall by a quarter. Coming after so many cuts during this parliament, areas like local government, the criminal justice system and further education would face collapse.

At last year’s Conservative conference, George Osborne set out his alternative: a further £10bn of social security cuts. So far, in the face of Lib Dem resistance, he’s found only one third of that total - by restricting increases to many benefits to 1 per cent a year. Presumably a Conservative manifesto will promise further restrictions to social security and our commission looked at where £10bn of benefit cuts might come from. The news is not good for politicians looking to win elections: we concluded that savings on this scale would only be possible by reducing pensioner entitlements or means-testing all the remaining universal entitlements for working-age households.

Attacking the popular parts of social security would be highly controversial of course, but it would only slightly ease the pressures on public services. Even after £10bn of new social security cuts, many departments could still face budget cuts of 15 per cent over the two years from April 2016. So when Conservative politicians offer more of anything over the next 18 months, voters should beware. On their current spending plans, a new promise can only mean even deeper cuts somewhere else.

There is an alternative, according to the Fabian commission. With the economy finally growing again, big post-election reductions to social security and public service spending are a choice, not a necessity. Whichever party is in power, there will need to be financial discipline and tough choices, but there is also more room for manoeuvre than George Osborne seems to think. This is because today’s unexpectedly strong economic growth will translate into higher than predicted tax revenues. The Conservatives are earmarking this money for pre-election tax cuts, but it can instead be used to stop cuts. There is also the option of raising taxes for high income groups who are set to be the first to feel the benefits of recovery. Together these two measures would more or less avoid the need for cuts after 2015.

This week the Conservatives are confirming they would prefer a different route. Devoting the 'proceeds of growth' to pre-election tax cuts may seem like good politics, but it will create avoidable devastation to public services and further reduce public spending in areas critical for future economic success.

So far Labour has been silent on its post-2015 spending choices; it was the missing link for the party’s conference relaunch. But in due course Labour must set out spending plans which are fiscally water-tight but also entail spending more than the Conservative’s plan for cuts.

This is the, so far unspoken, dividing-line which will come to shape the next election. Labour should start to shout about it, because Conservative tax cuts will come with huge costs.

George Osborne arrives to deliver his speech to the Conservative conference in Manchester. Photograph: Getty Images.

Andrew Harrop is general secretary of the Fabian Society.

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A global marketplace: the internet represents exporting’s biggest opportunity

The advent of the internet age has made the whole world a single marketplace. Selling goods online through digital means offers British businesses huge opportunities for international growth. The UK was one of the earliest adopters of online retail platforms, and UK online sales revenues are growing at around 20 per cent each year, not just driving wider economic growth, but promoting the British brand to an enthusiastic audience.

Global e-commerce turnover grew at a similar rate in 2014-15 to over $2.2trln. The Asia-Pacific region, for example, is embracing e-marketplaces with 28 per cent growth in 2015 to over $1trln of sales. This demonstrates the massive opportunities for UK exporters to sell their goods more easily to the world’s largest consumer markets. My department, the Department for International Trade, is committed to being a leader in promoting these opportunities. We are supporting UK businesses in identifying these markets, and are providing access to services and support to exploit this dramatic growth in digital commerce.

With the UK leading innovation, it is one of the responsibilities of government to demonstrate just what can be done. My department is investing more in digital services to reach and support many more businesses, and last November we launched our new digital trade hub: www.great.gov.uk. Working with partners such as Lloyds Banking Group, the new site will make it easier for UK businesses to access overseas business opportunities and to take those first steps to exporting.

The ‘Selling Online Overseas Tool’ within the hub was launched in collaboration with 37 e-marketplaces including Amazon and Rakuten, who collectively represent over 2bn online consumers across the globe. The first government service of its kind, the tool allows UK exporters to apply to some of the world’s leading overseas e-marketplaces in order to sell their products to customers they otherwise would not have reached. Companies can also access thousands of pounds’ worth of discounts, including waived commission and special marketing packages, created exclusively for Department for International Trade clients and the e-exporting programme team plans to deliver additional online promotions with some of the world’s leading e-marketplaces across priority markets.

We are also working with over 50 private sector partners to promote our Exporting is GREAT campaign, and to support the development and launch of our digital trade platform. The government’s Exporting is GREAT campaign is targeting potential partners across the world as our export trade hub launches in key international markets to open direct export opportunities for UK businesses. Overseas buyers will now be able to access our new ‘Find a Supplier’ service on the website which will match them with exporters across the UK who have created profiles and will be able to meet their needs.

With Lloyds in particular we are pleased that our partnership last year helped over 6,000 UK businesses to start trading overseas, and are proud of our association with the International Trade Portal. Digital marketplaces have revolutionised retail in the UK, and are now connecting consumers across the world. UK businesses need to seize this opportunity to offer their products to potentially billions of buyers and we, along with partners like Lloyds, will do all we can to help them do just that.

Taken from the New Statesman roundtable supplement Going Digital, Going Global: How digital skills can help any business trade internationally

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