Plans go far beyond even what fiscal conservatives would view as strictly necessary. Photo: Getty
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Planned spending cuts go far beyond what is needed to end borrowing

The big news is what George Osborne didn’t mention.

Growth is up this year – but in return will be lower than expected in previous years. Tax receipts have disappointed, and have been revised downwards in the coming years too. This much was generally expected. But the good news is George Osborne is still on track. Statistical revisions this year have helped a bit. Lower than expected interest payments have helped a lot.

The coalition plan is still in line with the Conservatives’ mission to eliminate borrowing by 2018-19. Public sector debt is expected to start falling in the middle of the next parliament. But to keep up with borrowing targets when taxes are looking weak, more cuts are being pencilled in – from 2016-17 to 2018-19, departmental spending is being squeezed even further than previously expected, by around £5.8bn a year on average.

But there is more going on here than simply some extra cuts being pencilled in (yet again) to ensure that the public finances stay on track to meet the fiscal targets.

Not mentioned in the Chancellor’s speech, but quickly apparent from the OBR’s report is that the current government is planning spending cuts that would go far beyond what is needed to eliminate borrowing. Although borrowing will have turned into a surplus by 2018-19, the OBR’s figures show that the current government plans to keep cutting beyond that, to create an overall annual surplus – after including investment as well as day-to-day spending – of over £23bn by the end of the next parliament.

Compared to holding departmental spending flat as a share of GDP, that amounts to a cut of £14.5bn. The result is that the government is now only 40 per cent of the way through its cuts to departmental spending, with the OBR expecting the remaining 60 per cent to come after the election.

What exactly are the Conservatives trying to achieve here? Their plans appear to go far beyond even what fiscal conservatives would view as strictly necessary. Even their plan to entirely eliminate borrowing, including borrowing to fund investment that boosts growth, is questionable.

IMF research shows that government investment, such as spending on infrastructure, can raise GDP with no overall rise in public debt. So a target to entirely eliminate borrowing for investment makes little economic or fiscal sense. And given that we have somehow managed to reduce government interest payments whilst debt is still increasing suggests that now is still an excellent time to borrow for investment in growth.

The government has given the public no rationale for these extra cuts. As a proportion of GDP, government spending is being taken back to the level last since in 1938. If there was room for doubt before, there appears to be little now. A dramatically smaller state, not fiscal credibility, is the real goal here.

Nida Broughton is Chief Economist at the Social Market Foundation

Nida Broughton is Senior Economist at the Social Market Foundation.

Photo: Getty Images/Christopher Furlong
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A dozen defeated parliamentary candidates back Caroline Flint for deputy

Supporters of all the leadership candidates have rallied around Caroline Flint's bid to be deputy leader.

Twelve former parliamentary candidates have backed Caroline Flint's bid to become deputy leader in an open letter to the New Statesman. Dubbing the Don Valley MP a "fantastic campaigner", they explain that why despite backing different candidates for the leadership, they "are united in supporting Caroline Flint to be Labour's next deputy leader", who they describe as a "brilliant communicator and creative policy maker". 

Flint welcomed the endorsement, saying: "our candidates know better than most what it takes to win the sort of seats Labour must gain in order to win a general election, so I'm delighted to have their support.". She urged Labour to rebuild "not by lookin to the past, but by learning from the past", saying that "we must rediscover Labour's voice, especially in communities wher we do not have a Labour MP:".

The Flint campaign will hope that the endorsement provides a boost as the campaign enters its final days.

The full letter is below:

There is no route to Downing Street that does not run through the seats we fought for Labour at the General Election.

"We need a new leadership team that can win back Labour's lost voters.

Although we are backing different candidates to be Leader, we are united in supporting Caroline Flint to be Labour's next deputy leader.

Not only is Caroline a fantastic campaigner, who toured the country supporting Labour's candidates, she's also a brilliant communicator and creative policy maker, which is exactly what we need in our next deputy leader.

If Labour is to win the next election, it is vital that we pick a leadership team that doesn't just appeal to Labour Party members, but is capable of winning the General Election. Caroline Flint is our best hope of beating the Tories.

We urge Labour Party members and supporters to unite behind Caroline Flint and begin the process of rebuilding to win in 2020.

Jessica Asato (Norwich North), Will Straw (Rossendale and Darween), Nick Bent (Warrington South), Mike Le Surf (South Basildon and East Thurrock), Tris Osborne (Chatham and Aylesford), Victoria Groulef (Reading West), Jamie Hanley (Pudsey), Kevin McKeever (Northampton South), Joy Squires (Worcester), Paul Clark (Gillingham and Rainham), Patrick Hall (Bedford) and Mary Wimbury (Aberconwy)

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