Steve Richards: Why cling to the least helpful targets?

As ministers insist they have no time for targets, you cannot move for them in relation to the economy
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The Independent Online

This is a tale of three targets that will determine the fate of the Coalition, Labour and the British economy. The story has a contorted context. The Coalition drops sensible targets for public services on the grounds that they do not work and adopts a silly one with evangelical zeal that is rigidly applied to economic policy. The target to wipe out the deficit proclaimed with a flourish last year explains all that has followed, the radical reforms announced with crusading fervour and now applied tentatively, the U-turns, the ministerial apologies and above all the sluggish, virtually non-existent growth.

George Osborne's target is partly a response to Alistair Darling's deficit-cutting objective, announced before the last election. Darling's is the first target in this tale. As an added twist Ed Miliband has reacted to Osborne's resolute policy by re-adopting Darling's target. Miliband's is the third. As ministers insist that they have no time for targets, implying they prefer services to decline rather than be measured, you cannot move for them in relation to the decisive policy area of the economy.

Let us begin with the first because the others are directly connected. On the whole the policies explored and in some cases implemented under Gordon Brown's premiership were nowhere near as bad as current fashionable orthodoxy suggests, including in relation to the economy. Yet as the neurotic tension soared, he and his government lapsed into desperate, frenzied incredibility.

The silliness reached unprecedented levels when his government unveiled a Bill compelling the Chancellor to halve the deficit if Labour won the last election. The means were unclear and the consequences of failure were unspecified. Would a Labour chancellor have been arrested if he or she failed to meet the target? If there had been two or more chancellors during this parliamentary term, would they all end up in jail, or just the one at the end? Would mitigating circumstances be taken into account, such as the state of the global economy over which a chancellor has limited or no control? The farcical proposal was the last example of New Labour treating the House of Commons as a newsroom, proposing legislation simply to convey a message. There were many other examples, mainly relating to law and order. In this case Brown and others sought to show they were so concerned about the deficit that they wished to place their obligations on to the statute book. The device did not propel Labour to victory.

Nonetheless, the most absurd New Labour legislative proposal in a competitive field had a profound consequence. When I asked a senior minister to explain the Coalition's thinking on the deficit last autumn, he replied by making a direct reference to the Darling plan, suggesting that as the Labour chancellor had planned to halve the deficit, it was necessary to show a willingness to go further. He went on to explain that there was little point in announcing that the Coalition would cut by a bit more than half. In indicating that they thought Labour had been complacent and they would be tough, they went for double Darling's goal in an act of targeting machismo. Without Darling's target it is possible that the Coalition would not have opted for a tightly defined objective of its own, more extreme than austerity measures in other equivalent countries.

Osborne's spending review last summer attracted rave reviews from newspapers that regard public spending as a sin. Those ministers who cut most quickly were hailed as heroes. Ken Clarke was one of the first, and was widely proclaimed for his wisdom and experience. But the ministerial heroes then are the villains now, as the Coalition and its media supporters discover that rushed cuts have consequences. Clarke is the most recent fall guy. His plans for sentencing reform and cutting the numbers in prison are based on many needs. One of them is to save money. Last summer his proposals made him a star minister, a cutter of waste. Now he and his proposals are in trouble and will almost certainly be revised at a financial cost. This has already happened to Caroline Spelman, who had to apologise for her plans to sell off forests, a policy formed to save money. The plan is dropped.

The entire premise of Andrew Lansley's health reforms is based on spending constraints, or at least that is the only explanation David Cameron has found to justify the overhaul, a strange one as the proposals would be as costly as the privatisation of the railways, a fragmentation that makes Britain's trains the most expensive to run in the western world.

Ministers seek to be historic radical reformers and yet in the short term at least their proposed changes often need more spending. At the same time, they have a target to wipe out the deficit quickly. The conflicting aspirations are the cause of internal tension, rather than overstated differences between the Tories and Orange Book Liberal Democrats in the Government.

Most fundamentally, Osborne has little room for flexibility, having stated his target. Newspapers and even revered international institutions such as the IMF can change their tunes. What is he doing about growth, some of them ask with increasing urgency? The Daily Telegraph was the latest to do so, on Tuesday. Osborne presses on, clinging to his spending target like a protective shield that could metamorphose into a deadly weapon that turns on him.

In such circumstances Labour should be well placed, but it is partially trapped too. In response to Osborne's target, Ed Miliband re-adopted Darling's objective. In every interview he cannot move on from the question: so what would you cut to meet your target? By the time of the next election Osborne will claim that in cutting the deficit faster than Labour had intended he has addressed the critical issue, even if lives are wasted and growth is dangerously sluggish as a result. In a race to cut the deficit Labour has chosen to lose. Of course it is not the only race that matters, and it is possible that Labour's more active approach to the economy would have led to higher growth and a stronger economic base. There were several indications that this was the case last summer as the economy began to grow and borrowing was slightly less than forecast. But as at the last election it opts, at least for now, to fight a race of Osborne's choosing on the deficit.

This is a story about targets and not about the principle of savings in the public sector or an argument about deficit denial. Even if the global financial crisis had not erupted, any government would have a duty to tackle inefficiencies in public services, although how this is done remains rightly a source of contention. Similarly a deficit cannot be ignored, but the policies for addressing it require more subtlety than cuts agreed in an intoxicating hurry last summer.

Targets are dangerous for the economy because flexibility is unavoidable and yet becomes politically impossible. The British economy is dependent on factors beyond its control. Any chancellor must constantly re-examine all policies in response to external circumstances. But we have a target. We have had three targets from the Coalition and Labour. They are trapped and not liberated by these unmoveable objectives in a fast-moving world.



s.richards@independent.co.uk

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