Morning Call: pick of the papers

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

1. US has been let down by its leadership (Financial Times)

A deal that extends unsustainable tax cuts for 98 per cent of Americans is no victory, says Nouriel Roubini.

2. Iain Duncan Smith's polemic is politics at its most cynical (Guardian)

How does the secretary of state's conceit, that in-work benefit claimants are fraudsters, serve the public interest, asks Zoe Williams.

3. Cosy up to China – are you sure about that? (Times) (£)

It’s easy to envy the boom, but as Beijing’s influence spreads around the globe we must confront the human cost, says David Aaronovitch.

4. We can end the elderly care lottery (Guardian)

Means-testing winter fuel payments could prevent old people losing their assets and their dignity, argues Paul Burstow.

5. Let taxpayers share rail fare pain (Independent)

More effort must be made to spread the investment costs more widely, says an Independent editorial.

6. Britain would vote to stay in the EU (Financial Times)

The UK electorate would almost certainly opt for the status quo, writes Gideon Rachman.

7. Fighting back against the left-wing guerrillas (Daily Telegraph)

Foes of public sector reform are waging war at a local level – they must be roundly beaten, says Sean Worth.

8. America could still go over the cliff — and take the rest of us with it (Daily Mail)

The American people, and, indeed, the rest of the world, urgently need to revise their view of how economically strong this ailing superpower really is, says Simon Heffer.

9. Christopher Martin-Jenkins: we're all the poorer for his passing (Daily Telegraph)

Our institutions need many more 'outsiders’ with the enthusiasm and knowledge of Christopher Martin-Jenkins, says Peter Oborne.

10. Cosmetic surgery is bad. That women feel the need for it is worse (Independent)

Now even the British Association of Aesthetic Plastic Surgeons is demanding change, writes Mary Ann Sieghart.

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