Tory spending plans ‘will cost Britain £54bn’

Treasury reveals price of pledges as Cabinet begins talks on where cuts will fall

Andy McSmith,Nigel Morris
Friday 18 September 2009 18:55 BST

Election promises made by David Cameron would cost a future Conservative government up to £54bn in five years, despite the Tory promises that they will cut taxes and reduce public debt.

The calculations were slipped out by the Treasury on the same day that new figures show another surge in government borrowing, and the search by the government for serious cuts in public spending got under way.

They show that promises made by Mr Cameron or senior shadow ministers would cost almost £3.5bn a year for five years, equivalent to about 1p in the pound on income tax. Capital costs would be at minimum £7bn, and could be £37bn.

Earlier this week, the Government was acutely embarrassed by the leak of a Treasury document, passed to the shadow Chancellor, George Osborne, which showed that officials have been working for months on making deep cuts in public spending, at the very time Gordon Brown had been attacking the Tories as “the party of cuts”.

But the latest revelation is a carefully timed reply to a Freedom of Information request, posted on the Treasury website on a heavy news day, as if to cause a minimum of embarrassment for the Conservatives, who could be their political masters in a few months.

It is normal for the Treasury to work out the cost of promises made by opposition politicians in the run-up to an election, though before the Freedom of Information act their findings were never made public. Officials have examined five Tory pledges that would increase public spending, and one that would cut the tax take.

The shadow Chancellor George Osborne promised two years ago to raise the threshold for inheritance tax from £300,000 to £1m. This was popular with middle class couples who hoped to clear their mortgages when their parents died, but the cost to the Government in lost revenue would rise annually, from £600m in the first year, to £1.7bn, making a total over four years of £5.3bn.

At last year’s Conservative conference, the Shadow Health secretary Andrew Lansley promised to give NHS patients the choice of a single room when they book their operation, but the Treasury note points out that the Department of Health definition of a single room means a rooms with four walls, with an en suite bathroom. They reckon that providing the extra 45,000 rooms will cost £1.9bn.

Mr Cameron’s green policy review group, headed by John Gummer and Zac Goldsmith, produced a report two years ago calling for a high speed north-south rail link. According to the treasury, that will cost a minimum of £4bn if by “the north” they mean Manchester. If they mean the north of Scotland, it could be £34bn.

In March, Mr Cameron and the shadow Justice Minister Nick Herbert launched a policy document Prisons with a Purpose which promised to end prison overcrowding, and that those convicted would spend longer in prison. The Treasury calculates that the capital costs alone will be £2.4bn.

A policy document Raising the Bar, Closing the Gap, launched by David Cameron and the shadow Schools Secretary Michael Gove in 2007, promised to create 223,022 new primary and secondary school places on new academies, of which 120,080 were to be created in five years. The Treasury says that the cost would be £1.8bn.

Two years ago, the shadow Defence Secretary Liam Fox said that the army was too small and a Conservative government would like to reinstate three recently disbanded infantry battalions. The Ministry of Defence calculated that the cost would be £778m in the first year, and £105m a year thereafter.

These figures are dwarfed by the grim statistics that emerged yesterday, showing that Britain is on course to go even deeper in the red than by the £175bn forecast by the Chancellor, Alistair Darling.

Mr Darling and Gordon Brown began a series of one to one meetings with Cabinet ministers to identify potential savings in their budgets.

An early candidate for the axe is the identity card scheme, with growing divisions around the Cabinet table over whether it should be put on hold or scaled back. The Independent disclosed in April that the ID programme was in peril as ministers seeks ways of reducing the debt mountain.

Alan Johnson, the Home Secretary, has already been in Downing Street for talks on trimming his budget, with other Cabinet ministers due to be called in within days. Each will be asked to identify savings as the Government embarks on the tightest public spending squeeze for three decades.

The negotiations began as Mr Brown, speaking to the TUC Congress this week, admitted for the first time that his government will have to cut spending to hit its target of halving Britain’s record debt levels within four years.

Mr Darling will unveil plans to achieve that aim in his Pre-Budget Report due in November. He is expected to set out details of where the axe could fall in an attempt to force the Conservatives to provide further details of their plans to reduce Whitehall spending.

The pressure he faces was underlined by official figures showed the national finances suffered their worst August on record.

Britain’s net borrowing amounted to £16.1bn last month – more than double the figure in August 2008 – and stands at £63.5bn in the first five months of the financial year. The Treasury insisted the figures were in line with the Chancellor's forecasts.

But David Cameron, the Tory leader, said: “We used to worry about borrowing £16bn in a whole year, but under this Government we’re borrowing it in one single month. They have completely lost control of the nation's finances.”

Richard Snook, senior economist at the Centre for Economics and Business Research, said: “There is an enormous black hole in the public finances which only major spending cuts can fill.”

Jonathan Loynes, chief European economist at Capital Economics, said: “August’s public finance figures did nothing to reduce the looming prospect of a very large fiscal tightening incorporating a severe squeeze on public spending over the next few years.”

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