Austerity and honesty. Will any of the parties level with the voters about what the post-2015 cuts will look like?

by Stephen Tall on July 30, 2014

con home cartoonHere’s my latest The Other Side column for ConservativeHome, published here on Tuesday. There were two points I wanted to make. First, that austerity is real, as there is a strain of right-wing commentators who argue it’s a chimera. And secondly, that while it’s set to continue beyond 2015 under all three parties’ plans, those of the Tories are spectacularly incredible/un-credible. My thanks as ever to the site’s editors, Paul Goodman and Mark Wallace, for giving a Lib Dem space to provoke – constructively, I hope.

The Coalition has been careful to avoid triumphalism over the latest economic figures. A couple of years ago any notion the UK’s annualised growth would be topping 3% and the IMF would be predicting we’ll be the fastest-growing G7 country would have resulted in Lib Dem and Conservative ministers delightedly conga-ing down Whitehall. But not now.

George Osborne struck a sober note, tweeting: “Economy bigger than previous peak in 2008 but long way to go – the Great Recession was one of deepest of any major economy & cost UK 6 years.” This was echoed by the Lib Dems’ Danny Alexander: “Today we are passing a major milestone on the long road back to full recovery. There is still a long way to go.”

Their muted celebrations acknowledged the political reality: voters aren’t feeling much gratitude right now. That’s not too surprising. The economy may have caught up with 2008 again, but real wages haven’t. The latest Ipsos-Mori ‘issues tracker’ poll tells us that the economy is less important to voters now than at any time since June 2008. Clearly they believe UK plc is doing okay; they’re just not sure when they’ll reap their own dividend.

The fear among some Conservatives is this will result in a ‘voteless recovery’, which is why all their MPs and activists have been microochipped to utter the words “our long-term economic plan” (‘Oltep’, as I see it’s been acronymed) as loud and often as possible. It’s a none-too-subtle warning to voters not to risk what recovery there has been by kicking them out of power too soon. It’s not often you get the politicians jabbing the voters to stop them being complacent.

Besides, any sense of complacency is misplaced. The economy may be steaming ahead, but we’re not done with austerity yet. There are still a handful of right-wing commentators around – Fraser Nelson, Allister Heath – who protest that George Osborne hasn’t been austere enough; that, for all the talk of cuts, public spending has scarcely been reduced. Their criticism is given credence by my own party’s leader, Nick Clegg, who has observed (factually) that “By the end of this Parliament, public spending will still be 42% of GDP. That’s higher than at any time between 1995 and when the banks crashed, in 2008.” What from Clegg is intended as a soothing line to reassure Lib Dems that the Coalition’s austerity programme is simply curbing the spending excess of the Blair/Brown years is taken by Messrs Nelson and Heath as confirmation that the Chancellor has wimped out of downsizing the state.

So let’s be clear: per capita spending on day-to-day public services is being cut by a massive and unprecedented amount even as total government spending shows a more gentle decline. How to explain this apparent paradox?

The reasons are partly demographic (a growing, ageing population is putting a lot more spending strain on pensions, benefits and health and social care) and partly economic (the weak labour market means lower tax revenues and higher social security payments). As Steven Toft notes here: “The result of this increased pressure on public finances is a shift in state spending away from public services and towards welfare and debt repayments.” The result? An estimated 28 per cent cut in per capita day-to-day spending on public services between 2010-11 and 2018-19. Not much evidence of Osborne wimping out there.

You’ll notice that time-span, 2010-19, covers two parliaments. A little over half the fiscal tightening required to tame the deficit has so far been implemented by the Coalition — which, the logicians among you will appreciate, means there’s a little under half still for the next government to do. All three main parties are signed up to balancing the budget in the next parliament. But that’s where the similarity stops. Both the Lib Dems and Labour have committed to eliminating the deficit while leaving themselves some wiggle room to borrow to invest in infrastructure. However, the Conservatives have gone far further. They have committed not only to eliminating the deficit but also to generating an absolute surplus, while ruling out any borrowing to invest.

The economist Giles Wilkes has crunched the numbers to see what the impact of this Conservative policy would mean for public services in the next five years. Assuming the Conservatives continue to ring-fence spending on health and schools, the next Conservative Chancellor will, he estimates, need to identify a further £36bn of spending cuts elsewhere: “The Home Office, Justice, Local Communities, BIS, Defra, DECC, core government departments which received about £100bn in cash terms in 2010/11, are already forecast to receive just £76bn in 2015/16 – and these fiscal plans imply that they will be forced to have just £40bn in 2018/19. That is really not credible!”

It really isn’t, especially with the NHS creaking at the seams even with its protected status. But we’ve been here before, of course. In April 2010, the IFS published its Election Briefing, highlighting that no party had yet set out anything like enough public spending cuts to meet their objectives of cutting the deficit. The Lib Dems had produced the most detailed measures, yet these totalled only 25% of the cuts needed; the Tories had identified 17%, and Labour just 13%. The finding attracted little scrutiny, with the media fixated instead on the personality-fest of the televised leaders’ debates.

Does anyone honestly think it’ll be that much different in 2015? Who will ask the parties to spell out the impact of their spending plans on public services so voters can come to an informed decision? Journalists like their politics bite-size and entertaining: hard facts are a turn-off.

It is, in any case, a bit too easy to blame the media or MPs: we voters have to take our share of responsibility. We say we want honest politicians, folk who’ll tell us straight how it is. Yet we don’t often reward such honesty. If we did there would be a few more MPs queuing up to tell us that (1) we need young, skilled, productive immigrants to staff key services like the NHS as well as to offset the financial burden of our ageing population, and (2) running the nation’s finances is nothing like running a household budget so eliminating the deficit within an artificial timescale like a five-year parliament is a pointless brag.

“We need politicians who’ll actually listen to us,” goes up the popular cry. But we already have them. At the next election, every prospective MP — whether their rosette is blue, gold, red or purple — will happily talk about their plans to improve services while not raising taxes (maybe even cutting them) for people just like you. They’ll tell you that because it’s what you want to hear. Caveat emptor. Then, after the election, whoever finds themselves in power will have to get real. That, it seems, is how we like to do politics. Blame the Westminster elites if you like, but the cliché is true: we get the politicians we deserve.