The general election campaign burst into life last night when the three men who would be Chancellor clashed over how to cut the £167bn deficit in the public finances.
In the election's first major live television debate, George Osborne, the shadow Chancellor, struggled to defend the Tories' flagship policy, announced yesterday, to reverse Labour's planned 1 per cent rise in national insurance contributions (NICs) in April next year.
His proposal to find £12bn of government efficiency savings to finance the £5.6bn "tax cut" was ridiculed by both the Chancellor Alistair Darling and the Liberal Democrat Treasury spokesman Vince Cable in a heated one-hour debate on Channel 4. The pair also rounded on Mr Osborne over his commitment to begin cutting public spending in the financial year beginning next month, warning that the move could tip Britain back into recession.
Later the Tories claimed Mr Darling committed a "gaffe" by revealing a government decision to be announced today to rule out a compulsory "death tax" on people's estates to fund social care for the elderly.
Viewers who voted online during the programme awarded victory to Mr Cable, who won 36 per cent of their votes, compared with 32 per cent for Mr Darling and 31 per cent for Mr Osborne. The head-to-head programme, with questions from a 200-strong studio audience, was seen as a warm-up act for Britain's first election TV debates between the three main party leaders next month.
Mr Darling told his Tory shadow it was "incredible" that he had announced plans spend £30bn over five years by avoiding the increase in NICs, which would force a Tory government to cut spending deeper or put taxes up. "We have got to get our borrowing down. But the first thing you announce is not measures to reduce that borrowing, but instead to go on a spending spree which you cannot finance." He said Mr Osborne had "not a single penny in the bank" to pay for the tax cut.
Mr Cable recalled that the Tories had dismissed the £11bn efficiency savings announced in Mr Darling's Budget last week as "complete fiction, which frankly a lot of them are", but were now using the same device to finance their tax cut. "That is utterly incredible," he said.
Mr Osborne insisted that the proposed £12bn of savings had been been supported by two former government efficiency advisers, Sir Peter Gershon and Martin Read. "The choice is this: do you want taxes going up on people's incomes, on jobs in the middle of a recovery or do you actually want to tackle the wasteful government spending we see all around us?"
Labour will be delighted that Mr Osborne was under pressure on his party's key tax pledge, having decided to target him as the Tories' "weakest link".
But the Conservatives scented blood, claiming that Mr Osborne had forced the Chancellor to rule out a controversial Labour proposal for a 10 per cent levy on estates to fund the spiralling social care bill. Andy Burnham, the Health Secretary, will confirm that the idea has been dropped when he unveils a White Paper today following the collapse of all-party talks aimed at finding a pre-election consensus. The Cabinet's climbdown follows concerns that the proposed "death tax" would alienate older voters at the election.
The White Paper is not expected to include firm proposals on funding. Instead it will propose setting up a Royal Commission to draw up plans to fund care after 2015. "It's a simple question," Mr Osborne told Mr Darling. "Is that an option that a Labour government, if elected in four to five weeks' time, will keep on the table?" Mr Darling replied: "No, it is not."
Mr Cable and Mr Osborne both answered "yes" when they were asked whether public spending cuts would have to be deeper than those implemented 20 years ago by Margaret Thatcher. Mr Darling replied: "I said last week they are going to have to be pretty deep."
The three would-be chancellors agreed on the need to reduce the bill for public sector pensions, and all declined to rule out VAT rises in future to get the deficit under control.
Mr Darling said he had already taken "difficult" decisions to raise NICs and income tax for the highest earners. "That is the choice I made and that is the choice I'm sticking with," he added.
Mr Osborne admitted that there would be "some tax rises that we cannot avoid", but added: "The thing I am working hardest to avoid is the national insurance rise."
Asked to set out the qualities he brought to the post of chancellor, Mr Darling pointed to the "tenacity" which had helped steer Britain through a very difficult period. He said everything he did in politics was driven by a "sense of fairness".
Mr Osborne argued that he would bring "energy and new ideas" and teamwork to the job, and take difficult decisions which were "rooted in values". He denied his priority was cutting inheritance tax for estates over £1m, insisting his focus was his cuts in NICs.
Mr Cable cited his long experience of the private sector and warnings of the dangers in the economy long before the crash. He said the Liberal Democrats were different, because they were not "beholden to either the super-rich or militant unions".
"The Tories presided over two big recessions in office, they wasted most of the North Sea oil revenue, they sold off the family silver on the cheap. Now they want to have another turn to get their noses in the trough and reward their rich backers."
How did they do? Sean O'Grady's verdict
Darling was Darling. Whereas Cable sounded like an academic, and Osborne more like Tory Boy, the Chancellor was what he always professes himself to be, a grown-up politician, a practical man dealing with practical problems in that earnest way of his. He had three priorities: secure the recovery; get the deficit down; secure jobs in the future. Few numbers were quoted, and he looked vulnerable when pressed on the detail of spending cuts, as well he might. "Tenacity" was the quality he brought to bear on the crisis. That rang true. Still and all, he didn't really explain why the Government has not yet reformed the banks nor why it missed the dangers developing in the great bubble. In other words, he was fairly lucky that neither Cable nor Osborne pressed him on that. The Chancellor suffered from the handicap that we have heard his shtick often, so that made his presentation predictable as well as dull. He did better, one suspects, than he had hoped, and probably better than Ed Balls might have. That was the main thing. He is a politician, after all.
BUDGET BOX RATING ***
As the underdog, George Osborne went in to the studio with the least to lose, and he lost it. It must have seemed a good idea at the time, the cut in national insurance paid for by cuts and efficiency savings in the public sector, but the Tory message has been badly muddied by this. The post-show Tory spinners did a no more effective job than the shadow Chancellor himself in answering the question about what comes first: cutting borrowing or cutting taxes? If those economies are really there, then is it not – as David Cameron and Osborne have been claiming for months – best to hurl the cash into the desperate cause of defending the nation's triple-AAA credit rating? In 1940, Winston Churchill didn't talk about relieving the burden of NI on the middle classes while the fate of the nation hung in the balance. So why now? Osborne had the whiff of decay about him. He sounded almost petulant in refusing to co-operate on care for the elderly. If George's problem was credibility, then a Channel 4 debate was not the answer. It was very Labour circa 1992 – not quite sorted out and not quite convincing.
BUDGET BOX RATING: *
The cult of Cable lives. The Liberal Democrat went into this debate with the most to lose, but he none-too-gently reminded the audience that he did indeed warn about the impending crisis, the candy floss economy founded on debt and a housing bubble – and they warmly applauded him. Thus emboldened, he cleaved to Darling on economics, and to George Osborne on taxing, breaking up and castrating the "casino banks". Neither his opponents nor the chair nor the audience seemed inclined to scrutinise the weaker points in the Cable critique, though Darling did make the point that it wasn't just big bad banks that failed – it was small bad banks, such as Northern Rock and Bradford and Bingley too. It was a clever little waltz by Vince. Oddly, Cable didn't make enough of his best policy, which is to take anyone under £10,000 a year out of income tax. And it is hard to believe that a man of Mr Cable's intelligence and sensibility could come out with a line about bankers being "pin-striped Scargills". He looked slightly ill at ease knocking that one out, but that's politics.
BUDGET BOX RATING: ****Reuse content