David Cameron and George Osborne may have offered a resolute defence of their spending cuts this week but today it’s emerged that the Treasury is working on plans to “reprofile” the cuts, in other words, delay them.
Today’s FT reports that ministers are considering pushing many of the biggest cuts back until later in this Parliament, ostensibly due to the risk of financial penalties for breaking contracts. But the piece also claims that ministers are finally acknowledging the threat that the cuts pose to the fragile recovery.
With the admirably honest Ken Clarke recently warning (as he first did in June) that the risk of a double-dip recession is real, it’s no surprise that his colleagues are thinking again. Meanwhile the IMF warns in its latest World Economic Outlook that the cuts must be revised if “growth threatens to be substantially lower”. And with Tories from Boris Johnson to Liam Fox rushing to the defence of public investment, the tide is beginning to turn against the hawkish Osborne.
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Were the cuts to be delayed, even by a relatively insignificant amount, Labour, and in particular Ed Balls, could claim a significant political victory. Their contention has long been that the cuts are not only unfair (as the IFS has repeatedly demonstrated) but that they are also unnecessary and economically defective. And, once the coalition has conceded that some cuts can be delayed, it becomes that much harder to argue for those that remain.
But this shouldn’t be mistaken for a significant change of direction from Osborne. His plan to achieve what a New York Times editorial accurately described as a “pointless structural Budget surplus” by the end of this Parliament, remains unchanged. There will still be plenty for the left to march against this autumn.