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Spending review: Osborne the axeman Spending review: Osborne the axeman
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Before getting into the detail of Wednesday's spending review, one fundamental fact should be borne in mind: this was not a statement George Osborne ever wanted to make. In March 2011, he told the House of Commons: "We have already asked the British people for what is needed, and … we do not need to ask for more." The coalition laid out its proposed spending cuts in 2010: its austerity programme was meant to be finished within this parliament. According to that fabled plan A, the economy should by now have been well on the road to recovery. As the chancellor admits, that turnaround has not materialised. The result is that government borrowing is far above official forecasts, and so cuts that were supposed to be all but over by 2015 now stretch all the way out to 2018 – and economists are already talking about a further extension to 2020. It is against that backdrop that Wednesday's spending review must be read: more misery to be heaped on the poorest and most vulnerable, additional cuts to public services along with further privations for teachers, firefighters, council employees – as a direct result of this government's failed economic policy. Before getting into the detail of yesterday's spending review, one fundamental fact should be borne in mind: this was not a statement George Osborne ever wanted to make. In March 2011, he told the House of Commons: "We have already asked the British people for what is needed, and … we do not need to ask for more." The coalition laid out its proposed spending cuts in 2010: its austerity programme was meant to be finished within this parliament. According to that fabled plan A, the economy should by now have been well on the road to recovery. As the chancellor admits, that turnaround has not materialised. The result is that government borrowing is far above official forecasts, and so cuts that were supposed to be all but over by 2015 now stretch all the way out to 2018 – and economists are already talking about a further extension to 2020. It is against that backdrop that yesterday's spending review must be read: more misery to be heaped on the poorest and most vulnerable, additional cuts to public services along with further privations for teachers, firefighters, council employees – as a direct result of this government's failed economic policy.
Yet so skilled an operator is Mr Osborne that he was able to present £11.5bn of cuts, beaten out of his cabinet colleagues and only agreed last Sunday, as an economic strategy – and to use the opportunity to draw battle lines ahead of the next general election. Plenty of the themes that will shape the next two years were laid out on Wednesday afternoon: Labour painted as the "welfare party"; the Conservatives' support for pensioners (unless they happen to be expats on the Spanish coast, in which case they will lose their winter fuel allowance); the protection for soldiers and their families at the expense of teachers and civil servants, who will now have their pay capped until 2016. Yet so skilled an operator is Mr Osborne that he was able to present £11.5bn of cuts, beaten out of his cabinet colleagues and only agreed last Sunday, as an economic strategy – and to use the opportunity to draw battle lines ahead of the next general election. Plenty of the themes that will shape the next two years were laid out yesterday afternoon: Labour painted as the "welfare party"; the Conservatives' support for pensioners (unless they happen to be expats on the Spanish coast, in which case they will lose their winter fuel allowance); the protection for soldiers and their families at the expense of teachers and civil servants, who will now have their pay capped until 2016.
It was an adept performance that almost covered up for the fact that, as even senior cabinet ministers acknowledge, this spending round was almost pointless. To be much use, spending reviews should cover three- or four-year periods: this one told us about the outlook for one, 2015-16, when another government may well be in charge. Second, as major economic statements go, this one has all the hallmarks of answering the wrong exam question. At a time of deep slump, the first priority for any government ought to be to create decent, well-paying jobs and a sustainable recovery. That will not be accomplished by announcing another round of public works on Thursday. Set aside the neat political choreography and what Danny Alexander is set to promise are infrastructure projects that will begin well after the next election and will in any case be funded by pulling money out of other government budgets. It was an adept performance that almost covered up for the fact that, as even senior cabinet ministers acknowledge, this spending round was almost pointless. To be much use, spending reviews should cover three- or four-year periods: this one told us about the outlook for one, 2015-16, when another government may well be in charge. Second, as major economic statements go, this one has all the hallmarks of answering the wrong exam question. At a time of deep slump, the first priority for any government ought to be to create decent, well-paying jobs and a sustainable recovery. That will not be accomplished by announcing another round of public works today. Set aside the neat political choreography and what Danny Alexander is set to promise today are infrastructure projects that will begin well after the next election and will in any case be funded by pulling money out of other government budgets.
Mr Osborne's aim on Wednesday was to make the best fist of hard times by appealing to middle Britain with the logic "my enemy's enemy must be my friend". The primary enemy was, once again, the imaginary slob who passes his days on the sofa courtesy of generous benefits. The chancellor lacked all conviction as he mouthed his old lie about the burden being shouldered by those with the broadest shoulders, a claim only justified by factoring in Labour tax changes. Wednesday was supposed to be about the running costs of government departments not benefits, but room was nonetheless found for fresh welfare cuts. The newly laid-off will be denied benefits for their first week without work, an invitation to debt, if not crime. There was a shin-kicking requirement for the workless to sign on at the jobcentre weekly rather than fortnightly, a policy to waste the time of scarce officials too. There will be higher rents, and a stealthy hit to the elderly poor in receipt of pension credit. Mr Osborne's aim yesterday was to make the best fist of hard times by appealing to middle Britain with the logic "my enemy's enemy must be my friend". The primary enemy was, once again, the imaginary slob who passes his days on the sofa courtesy of generous benefits. The chancellor lacked all conviction as he mouthed his old lie about the burden being shouldered by those with the broadest shoulders, a claim only justified by factoring in Labour tax changes. Yesterday was supposed to be about the running costs of government departments not benefits, but room was nonetheless found for fresh welfare cuts. The newly laid-off will be denied benefits for their first week without work, an invitation to debt, if not crime. There was a shin-kicking requirement for the workless to sign on at the jobcentre weekly rather than fortnightly, a policy to waste the time of scarce officials too. There will be higher rents, and a stealthy hit to the elderly poor in receipt of pension credit.
Although mean-spirited, the chancellor's plan to "cap the system as a whole" was more significant. Just as Gordon Brown once attempted to lock future Tory governments into his social legacy with child poverty legislation and 30-year PFIs, Mr Osborne now wishes to taunt the opposition into matching his cap, and cement a new consensus for his cuts. In one sense, he has already succeeded – Ed Miliband is now committed to the principle of a cap. That, however, is just a phrase; the important thing is for Labour to hold its nerve and reject the specifics of Osborne's cap. It must do so, first, on grounds of economics. While jobseeker's allowance is outside the cap, housing benefit and tax credits that flow from both un- and under-employment would be included, weakening the mechanisms that automatically stabilise an economy through a recession. It should reject, too, the irresponsible plan to fix the cap in cash rather than real terms. Above all, it must knock down "the something for nothing argument", seeing as many of the payments capped are to people who work hard for low pay. Liberal Democrat ministers listened while a Conservative chancellor cut the student grants that were their supposed compensation for tripling fees. There was a promise of nuclear power which the party has long opposed, and money for Michael Gove's free schools, but a real-terms freeze for Nick Clegg's pupil premium.Although mean-spirited, the chancellor's plan to "cap the system as a whole" was more significant. Just as Gordon Brown once attempted to lock future Tory governments into his social legacy with child poverty legislation and 30-year PFIs, Mr Osborne now wishes to taunt the opposition into matching his cap, and cement a new consensus for his cuts. In one sense, he has already succeeded – Ed Miliband is now committed to the principle of a cap. That, however, is just a phrase; the important thing is for Labour to hold its nerve and reject the specifics of Osborne's cap. It must do so, first, on grounds of economics. While jobseeker's allowance is outside the cap, housing benefit and tax credits that flow from both un- and under-employment would be included, weakening the mechanisms that automatically stabilise an economy through a recession. It should reject, too, the irresponsible plan to fix the cap in cash rather than real terms. Above all, it must knock down "the something for nothing argument", seeing as many of the payments capped are to people who work hard for low pay. Liberal Democrat ministers listened while a Conservative chancellor cut the student grants that were their supposed compensation for tripling fees. There was a promise of nuclear power which the party has long opposed, and money for Michael Gove's free schools, but a real-terms freeze for Nick Clegg's pupil premium.
The picture that emerged from Wednesday's spending review was of a Britain in 2016 that resembles a joyless version of Britain in 2006. Rebalancing? Forget about it. Overhauling the banks? Not a chance. And growth is likely to come from the housing market and rising personal debt. The future, in other words, will look a lot like the bad old past. The picture that emerged from yesterday's spending review was of a Britain in 2016 that resembles a joyless version of Britain in 2006. Rebalancing? Forget about it. Overhauling the banks? Not a chance. And growth is likely to come from the housing market and rising personal debt. The future, in other words, will look a lot like the bad old past.