Andrew Grice: Gordon must stick to his promise and use the dreaded 'C-word'

Inside Politics
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What should be the dominant issue at the general election? The cuts, stupid. But the parties are not being totally honest when they talk about their medicine for our sick public finances.

Nick Clegg deserves marks for trying after pruning his party's spending plans this week. The Liberal Democrats have long been addicted to binge spending. We now know that university tuition fees would be abolished after six years of a Liberal Democrat government. Back in the real world, fees are certain to rise whether the Conservatives or Labour win although they won't admit it until after the election.

The Tories certainly talk a good game. They frequently tell us the public deficit, even if Labour was to meet its pledge to halve it in four years, would still be bigger than when the Labour Chancellor Denis Healey axed spending to meet the International Monetary Fund's demands in 1976.

Politics normally trumps economics at election time. When the Tories are specific about cuts, Labour accuses them of relishing the prospect and wanting to complete Margaret Thatcher's mission to demolish the state. George Osborne, the shadow Chancellor, spelled out some of the Tories' immediate post-election cuts in a speech on Thursday night. The only trouble was that he had already announced his plans to end tax credits and child tax funds for the better off at the Tory conference last October. True, he did make the timing clearer: his cuts would start within weeks of an election victory. Labour would not cut until the 2011-12 financial year, claiming the recovery would be put at risk by earlier action. Although some economists agree, the Labour argument conveniently puts off the evil day until after the election.

The Tories still have a lot to do. The Institute for Fiscal Studies reckons that the Tory cuts announced so far would account for only about a sixth of those needed to go further and faster than Labour. The Tories claim Labour should set out departmental spending totals to 2013-14, yet they have so far only given a glimpse of what they would do in 2011-12. The two main parties can't resist point-scoring and Labour is now warning that schools, local government, job centres and many other public sector bodies could see their budgets slashed soon after the start of the financial year beginning in April.

There was a shaft of light when Mr Osborne answered questions after his speech at the London School of Economics. Without committing himself, he spoke favourably of deficit reduction plans in which 80 per cent was achieved by cuts and 20 per cent by tax rises. (The Tories might well raise VAT but don't want to talk about that – you guessed it – before the election). Labour's ratio is to raise about two-thirds of the money needed through spending cuts and one-third from tax rises. An important difference, although the parties don't shout it from the rooftops.

Labour has its own troubles. Gordon Brown's instincts are to spend, not to cut. With an election coming, the desire to make promises is even stronger. Mr Brown showed his true colours in his BBC TV interview with Andrew Marr two weeks ago. His only use of what Labour insiders call "the C-word" was to describe the big election choice between "decent frontline services" and "blanket spending cuts".

Ministers including the Chancellor, Alistair Darling, and Lord Mandelson exploited the instability caused by the abortive backbench Labour coup to extract concessions from Mr Brown in return for their support. They hope they have secured a more balanced approach to spending. Significantly, the Prime Minister told separate meetings of the Cabinet and Labour MPs this week that his party could not re-run its 2001 and 2005 election campaigns this year. Decoded, that means "investment versus cuts" is out.

Mr Darling and Lord Mandelson were appalled by the way Mr Brown was selling last month's pre-Budget report. They wanted the pledge to halve the deficit given equal weight to protecting schools, health and the police. Mr Brown seemed to mention the good news on spending without the bad news on cuts.

The Darling-Mandelson camp blamed the influence of Ed Balls, the Schools Secretary. Brown aides say the much-maligned Mr Balls is the "pantomine villain" of the moment, blamed for everything – including a non-existent "class war" he does not favour. The Brownites say Mr Balls was the first to warn last spring that Labour would not be able to attack "Tory cuts" unless it acknowledged the need for some of its own. Mr Balls, Lord Mandelson and Mr Darling then twisted Mr Brown's arm. The Prime Minister uttered the "C-word" through gritted teeth last September but then slipped back into his old ways. Now he has promised to go straight, again.

Does Mr Brown really mean it? The test will come in the Budget in March. The Chancellor could square the circle by ruling out cuts in 2010-11 but announcing some specific, big-ticket ones from 2011-12. It might be difficult, brave or stupid on the eve of an election. But real "Labour cuts" would reassure the financial markets and, crucially, put more pressure on the Tories to spell out theirs, so we could have a proper debate about the options. You never know, Labour might even win the argument.

I suspect that Mr Darling wants to do it. The big question now is whether Mr Brown will let him.

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