Next week with trumpets blaring George Osborne announces the outcome of the Comprehensive Spending Review. There will be cheers from some and despair from others as department spending is slashed, but a lot of the details will be missing and some of the cuts will not be immediate. It will not be the final word and revision will follow.
I am willing to bet the size of the deficit that the Coalition doesn't reduce public spending by 25 per cent in this parliament as it is pledged to do. I do not believe it will get anywhere near that target.
My confident prediction is based on a mountain of evidence forming already, before Osborne begins his hazardous journey. Let us begin first with David Cameron's press conference in Downing Street yesterday. He noted that in relation to the economic situation there were "a lot of moving parts" and cited the unpredictability of what would happen in the rest of Europe and the United States as two examples. That represents enough moving parts to shift the supposedly one immovable object, the Government's determination to take out a quarter of public spending from a fragile economy. Why is that immovable when everything else is moving all over the place? The answer is that the pledge will not be so rigid as some ministers insist.
There is no better source for this than the public statements of Chris Huhne, a minister and economist who understands better than most of his Cabinet colleagues the dangers of relying on a precarious private sector to suddenly expand as the state contracts. Huhne stated at the weekend that the policy for cuts was not "lashed to the mast". He was repeating an argument he had made at a fringe meeting during his party's conference in Liverpool, where he pursued the same metaphor, arguing that boats travelling across the Mersey would change course if the conditions got stormier. It is absolutely clear that parts of the Cabinet, not just Huhne, regard the spending target as a flexible one.
The apparent rigidity is already being tested. The final negotiations between various departments and the Treasury are fraught, I am told. Suddenly ministers are discovering the virtues of public investment. They even realise that a few doomed quangos save money rather than waste it. To their horror, they find that reforms require additional investment, at least in the short term.
There was much evidence in the public speeches at last week's Conservative conference that senior Tories support the idea of spending cuts but not the specific consequences. Lauded for his "boldness" in the summer by some mighty newspapers, Osborne is being attacked now for daring to cut child benefit. Cameron and Osborne counted on the support of the Tory newspapers as they began their crusade. But newspapers are like departmental ministers. They support cuts in theory and then discover a very strong case for spending when faced with specific examples.
The target of a 25 per cent cut was set by a Chancellor who had never been a departmental minister. Already there is speculation, not denied by Cameron at his press conference yesterday, that some of the cuts will be delayed. In some cases delay will mean a more permanent postponement.
The fact that the Coalition will not wield the axe to quite the extent it had intended should be of limited comfort to Labour and its new leader, Ed Miliband. On one level Miliband looks at an open goal, as a Coalition that exaggerated the risk posed by the deficit acts in a bewildered and over-the-top fashion to address it. But if the cuts are not lashed to the mast, Labour will need to be prepared for many changes of course, in the way that Cameron and Osborne switched their tax and spend policies several times in opposition.
Perhaps the Coalition will be slaughtered for the cuts that do take place. Perhaps it will be slaughtered for failing to impose as many cuts as it currently plans. But perhaps, to follow Huhne's metaphor, it will sail through in reasonable shape as the economy starts to grow again. In the 1980s Margaret Thatcher won landslides in spite of changing her economic policy (her hard-line monetarism lasted for a year at the most) and imposing cuts that led to high unemployment. Osborne plans to offer tax cuts at the next election and it only takes a small proportion of the electorate to be grateful for the Conservatives to win an overall majority.
That is why Miliband was mistaken in his appointment of shadow Chancellor. Look back at successful oppositions and the shadow Chancellor was almost as pivotal as the leader. Up to 1979, from the moment of Thatcher's election as leader of the opposition in 1975, Geoffrey Howe worked around the clock to prepare practical policies. His first Budget had been written before the 1979 election. After 1994, Gordon Brown did the same, making Labour credible, popular and with subtle plans to redistribute and invest. Titanic politics. Osborne is the other example of an epic shadow Chancellor, although his policy-making was more erratic than the other two.
Miliband was lucky to have the choice of two economists with political guile who would have worked around the clock to get Labour in a credible and popular position by the next election, and who would then be ready to enter the Treasury with their radical plan. Ed Balls or Yvette Cooper could have done the job. Balls was especially well qualified and would have exposed the weaknesses in Osborne's armoury at the same time. Instead, Labour's new leader went for the quiet life and selected the affable and competent Alan Johnson. The appointment does not feel as significant and portentous as the selection of Messrs Howe, Brown and Osborne in the past, figures with a gargantuan appetite for power and a sense of economic direction. I understand why Miliband made his moves, but they were the wrong ones in an otherwise composed and courageous start.
At least the appointment of a shadow Chancellor ill-suited for the long haul is not on the same scale of misjudgement as the Chancellor announcing a 25 per cent cut in spending without knowing where all the money is going to come from. Still George Osborne does not know.Reuse content