Morning Call: pick of the papers

The ten must-read comment pieces from this morning's papers.

1. Cameron’s incurable European headache (Financial Times)

This is where the irresistible force of rising Tory europhobia meets the immovable object of geopolitical reality, writes Philip Stephens.

2. It’s too early for the Tories to assume defeat is inevitable in 2015 (Daily Telegraph)

David Cameron could be a transformative leader if he had more faith in his power to change minds, says Fraser Nelson.

3. Algeria spills more blood (Guardian)

The violent end to this standoff is only the start of a new chapter in the country's savage history, writes Nabila Ramdani.

4. Don’t reject a referendum, Ed. Fast-track it (Times) (£)

The Labour leader should seize his chance to appeal to British business and voters, says Philip Collins. He must offer an in-out vote now.

5. Mali is not a global conflict. It doesn't require a global response (Independent)

The notion of a global threat from a revived al-Qa'ida should be familiar by now; it's the same flawed reasoning the led the US to launch its "war against terror", says Adrian Hamilton.

6. A living wage, or a much higher minimum wage, is worth paying (Daily Telegraph)

As City profits soar, the low-skilled, service areas of the economy continue to suffer a fall in income, writes Jeremy Warner. Radical action might avoid a social catastrophe.

7. A funny way of firing up the locomotive (Financial Times)

Now and in the interwar period, austerity policies have often failed in their own terms as they have made deficits worse, writes Samuel Brittan.

8. Mr Cameron and the speech that never was (Daily Mail)

The Prime Minister is confronting one of the most crucial issues of our times while Ed Miliband has nothing useful to say, argues a Daily Mail editorial.

9. Hugh Gaitskell: New Labour's old roots (Guardian)

Tony Blair never acknowledged the influence of his most like-minded predecessor, who died 50 years ago this week, says a Guardian editorial.

10. Why today’s American presidents need a third term (Independent)

There are compelling reasons why two four-year terms may not be enough for a competent and popular US president today, writes Mary Dejevsky.

Photo: Getty Images
Show Hide image

There are risks as well as opportunities ahead for George Osborne

The Chancellor is in a tight spot, but expect his political wiles to be on full display, says Spencer Thompson.

The most significant fiscal event of this parliament will take place in late November, when the Chancellor presents the spending review setting out his plans for funding government departments over the next four years. This week, across Whitehall and up and down the country, ministers, lobbyists, advocacy groups and town halls are busily finalising their pitches ahead of Friday’s deadline for submissions to the review

It is difficult to overstate the challenge faced by the Chancellor. Under his current spending forecast and planned protections for the NHS, schools, defence and international aid spending, other areas of government will need to be cut by 16.4 per cent in real terms between 2015/16 and 2019/20. Focusing on services spending outside of protected areas, the cumulative cut will reach 26.5 per cent. Despite this, the Chancellor nonetheless has significant room for manoeuvre.

Firstly, under plans unveiled at the budget, the government intends to expand capital investment significantly in both 2018-19 and 2019-20. Over the last parliament capital spending was cut by around a quarter, but between now and 2019-20 it will grow by almost 20 per cent. How this growth in spending should be distributed across departments and between investment projects should be at the heart of the spending review.

In a paper published on Monday, we highlighted three urgent priorities for any additional capital spending: re-balancing transport investment away from London and the greater South East towards the North of England, a £2bn per year boost in public spending on housebuilding, and £1bn of extra investment per year in energy efficiency improvements for fuel-poor households.

Secondly, despite the tough fiscal environment, the Chancellor has the scope to fund a range of areas of policy in dire need of extra resources. These include social care, where rising costs at a time of falling resources are set to generate a severe funding squeeze for local government, 16-19 education, where many 6th-form and FE colleges are at risk of great financial difficulty, and funding a guaranteed paid job for young people in long-term unemployment. Our paper suggests a range of options for how to put these and other areas of policy on a sustainable funding footing.

There is a political angle to this as well. The Conservatives are keen to be seen as a party representing all working people, as shown by the "blue-collar Conservatism" agenda. In addition, the spending review offers the Conservative party the opportunity to return to ‘Compassionate Conservatism’ as a going concern.  If they are truly serious about being seen in this light, this should be reflected in a social investment agenda pursued through the spending review that promotes employment and secures a future for public services outside the NHS and schools.

This will come at a cost, however. In our paper, we show how the Chancellor could fund our package of proposed policies without increasing the pain on other areas of government, while remaining consistent with the government’s fiscal rules that require him to reach a surplus on overall government borrowing by 2019-20. We do not agree that the Government needs to reach a surplus in that year. But given this target wont be scrapped ahead of the spending review, we suggest that he should target a slightly lower surplus in 2019/20 of £7bn, with the deficit the year before being £2bn higher. In addition, we propose several revenue-raising measures in line with recent government tax policy that together would unlock an additional £5bn of resource for government departments.

Make no mistake, this will be a tough settlement for government departments and for public services. But the Chancellor does have a range of options open as he plans the upcoming spending review. Expect his reputation as a highly political Chancellor to be on full display.

Spencer Thompson is economic analyst at IPPR