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4 December 2014

Labour would cut much less than the Tories. Will it dare say so?

The party's plans would allow it to shield services from the worst. But for fear of appearing profligate it won't tell voters. 

By George Eaton

If evidence was needed that the Conservatives fear the political consequences of the cuts to come, today’s assault on the BBC’s coverage of the Autumn Statement provided it. In his interview on the Today programme this morning, George Osborne denounced its reporting as “totally hyperbolic”. The Chancellor, who never acts without political intent, was later supported by David Cameron whose spokesman said: “The prime minister and the chancellor do think those are hyperbolic descriptions, which don’t help us have what is important here, which is a clear and sensible and measured debate about the decisions that both are being taken and need to be taken in the future.”

It was BBC assistant political editor Norman Smith’s description of the OBR document as “the book of the doom” and his suggestion that the UK was heading “back to the land of Road to Wigan Pier” that provoked their ire. But while journalists are hardly unknown for hyperbole, Smith can be cleared of this charge. Ideological allies and foes of Osborne agree that the figures contained in the OBR blue book are truly remarkable.

By 2019-20, state spending is forecast to be just 35.2 per cent, the lowest level since the 1930s. To reach this point, without increasing taxes (in fact cutting them by £7.2bn), the Tories will need to cut departmental spending by £55bn in the next parliament: £20bn more than is this one. With most of Whitehall’s low hanging fruit already having been plucked, the next government will find it impossible to cut without inflicting hitherto unimaginable damage on public services (which was exactly Smith’s point). Local councils, schools, prisons and courts will all struggle to perform their basic duties (as many already are). 

Unsurprisingly, as I write in my column this week, the Tories fear that greater awareness of this could cost them the election due in five months’ time. Osborne and other senior Tories partly blame their failure to win a majority on his “age of austerity” conference speech in 2009, which triggered a poll slump from which they never recovered. Labour was able to win back support as it warned of cuts to tax credits, reductions in child benefit, Sure Start closures and a rise in VAT (all denied by the Tories during the campaign only to be introduced immediately afterwards). In an attempt to avoid a repeat, the Tories are, quite logically, seeking to intimidate the BBC into silence. Fortunately, the corporation is putting up a robust defence, declaring that “We’re satisfied our coverage has been fair and balanced and we’ll continue to ask ministers the questions our audience want answered.”

But the central political question is whether Labour can capitalise. By promising to introduce new tax rises (a 50p rate, a mansion tax, a bankers’ bonus tax, a steeper bank levy), to leave room to borrow to invest and to only eliminate the current account deficit (rejecting the Tories’ target of an absolute surplus), Ed Balls has avoided the need for cuts on the scale proposed by Osborne. The Resolution Foundation estimates that the post 2015-16 fiscal tightening required under his rules could be as low as £4bn. Unlike Osborne, ideologically fixated on achieving a surplus by 2018-19, Balls is playing a longer game, leaving open the possibility that the productive capacity of the economy will eventually recover (reducing the need for extreme austerity). 

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Yet for fear of appearing profligate, Labour, as I note in my column, is terrified of saying as much. While vowing to reduce the deficit “in a fairer way” (through tax rises on the wealthy) and to promote the wage growth required to increase Treasury revenues, it won’t say that its approach will help to shield public services from the worst. The result is that the Greens and the SNP are able to accuse Labour of signing up to Osbornite austerity (“they’re all the same”) and to pocket voters from the left. Many assume, as Dan Hodges did today, that Balls’s plans mean he too would reduce spending to 1930s levels when the reverse is true. 

Interviewed on the Today programme this morning, the shadow chancellor rightly said: “I want to make sure we get the deficit down in a way which doesn’t destroy our national defences, undermine social care, hit the National Health Service”. But it took far too many questions before he made this point. As Osborne’s plans come under greater scrutiny from the BBC and others, the opposition will need to decide whether it is finally prepared to set out this dividing line.