Monday, 29 March 2010

Why painless Gershon savings won't fund Osborne's NI cut

It will be interesting to find out whether or the George Osborne National Insurance cut proves to be, according to choice and political inclination, the political masterstroke which rescues Osborne's credibility as the next Chancellor, or ends up looking more like an ill-thought through clever political wheeze which seals the Shadow Chancellor's reputation as an economic lightweight.

There is much scrutiny of the fairly scant details already. James Kirkup at the Telegraph is among those with some of the good early questions about whether the costing of the policy adds up. As do the Institute of Fiscal Studies and The Times, pointing out that the announcement was not quite what it seemed.

ConservativeHome can claim to have first predicted the new policy - and Tim Montgomerie celebrates the policy as reaffirming the Tories tax cutting credentials, noting they are already committed to inheritance tax cut and a married couples' tax break. (He doesn't mention the existing corporation tax cut pledge too).

But there's the rub. The always excellent Hopi Sen concisely captures the potential coherence risk to the overall Tory message and platform:

1. Say you’ll reduce taxes.
2. Don’t say you’ll cut any major spending programmes.
3. ????
4. Lower deficit!!!!

But surely there is another reason why no party can get an election winning dividing line and expensive policy out of claims to painless efficiency savings.

All Gordon Brown and Alistair Darling would now need to do is send Gershon and Read's rather sketchy four sheets of A4 to the relevant Permanent Secretaries, to judge whether any of the suggestions offer painless savings which can be made immediately.

If so, they could make the savings, to protect other spending or reduce the deficit.

If not, they could explain what the real policy choice is. Either way, George could well then have to find his £6 billion somewhere else.

Where such efficiency savings can genuinely be identified, every party can bank or use them. What they can't provide is a spending-protecting, tax-cutting, deficit-reducing magic bullet.

(For proof, look at how this morning, Osborne has already "banked" the £11 billion of future efficiency savings which government departments announced as future plans after the budget: he appears to be very confident those will be delivered in full, and guessing that there won't be too much overlap with his new savings).


Both Hopi Sen and Left Foot Forward have the rather more detailed critique from David Cameron about exactly why the Conservatives would not be doing exactly what they did this morning.

We all know that the easiest thing in the world is for an opposition party to stand up at an event like this and blithely talk about all the efficiency savings we will make in government; how we will streamline public spending, how we can close tax loopholes, how we can move towards a bright future of less spending and less tax with a few well-chosen cuts that miraculously deliver substantial savings without harming public service delivery at all

... The government “efficiency drive” is one of the oldest tricks in the book. The trouble is, it’s nearly always just that – a trick ...

... I do not believe in simplistic lists of cuts. In naive over-estimations of potential savings. Or in cobbling together a big number in order to get a good headline.””

Is that just a media embarassment to shrug off - or a serious blow to the credibility of the new manifesto centrepiece?

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