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4 December 2014

All the main parties are united in a conspiracy of silence about the scale of austerity to come

Having already trimmed Whitehall of fat, the next government will be forced to cut into bone. But no party will utter this truth. 

By George Eaton

Britain is heading for another parliament of pain. None of the main parties denies this truth: all speak with appropriate solemnity about the “tough choices” to come. In his Autumn Statement, George Osborne sought to turn economic failure into polit­ical success by arguing that only the Conservatives could be trusted to finish the job of eliminating the deficit. Labour’s slogan of choice is “Big reform, not big spending”, an attempt to redefine itself for these straitened times. The Liberal Democrats seek, as ever, to split the difference by vowing to cut the deficit faster than the opposition but in a fairer way than the Tories.

Here the truth-telling largely ends. No party is prepared to itemise the next dose of austerity. Labour and the Conservatives respectively target the wealthy and welfare for further fiscal tightening. But seeking to raise more from these popular sources is the politics of easy choices, not hard ones.

The Institute for Fiscal Studies (IFS) estimates that £12bn of additional consolidation will be required merely to maintain departmental spending cuts at their current level: a gap no party has come close to bridging. Some are more guilty than others – the Conservatives’ promise to cut taxes by £7.2bn, avoid further tax rises and eliminate the deficit by the end of the next parliament being the most egregious – but none is innocent. Divided on much else, the parties are united in a conspiracy of silence about the pain ahead.

After the 2010 general election, this was supposed to be impossible. The weekend before that contest, David Cameron declared that any future cabinet minister who proposed “front-line reductions” in services would be “sent straight back to their department to go away and think again”. During the campaign, he said that his party had “absolutely no plans” to raise VAT, that he “wouldn’t means-test” child benefit, that Sure Start centres would not be closed and that the Education Maintenance Allowance would remain in place. Each one of these promises was broken before the year was out. Never again, it was said, would any political leader be able to deceive the electorate so shamelessly. But the truth of Britain’s fiscal situation is now being hidden. In an election as tight as this one, no party wants to break ranks.

This absence of candour is not a new phenomenon. The IFS calculates that governments make tax cuts worth an average of £2.2bn in the year before an election and tax rises worth an average of £7.5bn the year afterwards. In his pre-poll Budget in 1992, Norman Lamont, then chancellor, announced net tax cuts worth £5.5bn. Later, he reflected: “Not a very good Budget. But it did help us to win the 1992 election.” Conversely, he described his Budget the following year, in which he unveiled tax rises worth £23bn, as having “helped to lose the 1997 election for the Conservatives”.

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By revealing their pre-election sweetener – a pledge to raise the personal allowance to £12,500 and the 40p tax threshold to £50,000 – at this year’s conference, Osborne and Cameron moved earlier than most expected. This was partly born of a desire to “do something” (in the words of one Tory MP) to erode Labour’s stubborn poll lead, as well as an awareness that the 2015 Budget could not be harnessed for this purpose. The Lib Dems regard the Autumn Statement as the coalition’s last major “fiscal act”. By next year, as they prepare to decouple from the Tories, it will be too late for deal-making.

The expectation in Westminster is that the Tories’ sweetener will be followed by a post-election sting. Osborne insists that he can eradicate the remainder of the deficit through spending cuts alone. But rather than issuing a “read my lips”-style pledge on tax rises, he has merely stated that he has “no plans” to increase the burden: the exact formulation used before the 2011 VAT rise. “George will conveniently discover that things are worse than he thought and raise taxes after the election,” one Conservative told me. With the Tories unlikely to win a majority, Lib Dems suggest that Osborne will blame any new measures, potentially including a mansion tax, on them.

One of the ironies of the duel between Osborne and his shadow, Ed Balls, is that the former has recently appeared as a hyper-Keynesian, spraying around unfunded commitments, while the latter has remained disciplined, rejecting any proposal that is not fully costed. This apparent role reversal reflects contrasting political fortunes. Osborne’s aides believe his reputation for fiscal rectitude gives him licence to indulge in giveaways, while Balls needs to combat Labour’s image as a party addicted to debt.

Yet the budgetary dividing line between the two men endures. Unlike Osborne, Balls has left room to borrow for investment and has avoided matching his promise of an overall surplus by 2020. But because of Labour’s reputation for profligacy, it is terrified of stating as much. “You won’t hear the word pass our lips,” a shadow cabinet minister says of “borrowing”. But with the exception of minor savings produced by Balls’s zero-based spending review, Labour has done little to set out how austerity would proceed under its laxer timetable.

Britain and its public services have absorbed the cuts better than most forecast. The civil insurrection that the left dreamed of and that the right feared never materialised. While believing that Osborne’s reductions have been unfair and premature, the voters have never stopped believing that they are necessary. But if austerity can be sold easily in times of stagnation, as an act of national belt-tightening, it is harder to sell in times of expansion. Having already trimmed Whitehall of fat, the next government will be forced to cut into bone. It should not be surprised when the voters ask why they weren’t better warned. 

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