David Alexander: Ending universal benefits may be the least worst option as the Government attempts to deal with the deficit

David Alexander was a senior adviser to John Howard's government in Australia and is a former economics editor of the Canberra Times who is now resident in the United Kingdom.

PJ O’Rourke once famously recommended the circumcision approach to public spending: you can cut 10 per cent off the top of anything and not affect its essential function.

It was a good point, but with looming cuts to all bar two government departments set to average 25 per cent, or even 33 per cent if defence and schools are partially shielded, it looks less like a little snip and more like heading into Lorena Bobbitt territory.

For a bloated state like Britain, such a level of spending cuts is highly desirable in economic terms, but if cuts of this size in a short time frame are not politically feasible, then the exercise could turn out badly.

The political opposition is going to be ferocious when the gory details of the Spending Review emerge, and the most difficult to manage criticisms for the government are likely to come from its own backbenches, from both parties.

In the face of the looming storms, some in government might be tempted to slacken the deficit reduction schedule to ease the pain, but the pounding to the Government’s economic credibility from such a move would be just as damaging, if not worse.

David Alexander was a senior adviser to John Howard's government in Australia and is a former economics editor of the Canberra Times who is now resident in the United Kingdom.

PJ O’Rourke once famously recommended the circumcision approach to public spending: you can cut 10 per cent off the top of anything and not affect its essential function.

It was a good point, but with looming cuts to all bar two government departments set to average 25 per cent, or even 33 per cent if defence and schools are partially shielded, it looks less like a little snip and more like heading into Lorena Bobbitt territory.

For a bloated state like Britain, such a level of spending cuts is highly desirable in economic terms, but if cuts of this size in a short time frame are not politically feasible, then the exercise could turn out badly.

The political opposition is going to be ferocious when the gory details of the Spending Review emerge, and the most difficult to manage criticisms for the government are likely to come from its own backbenches, from both parties.

In the face of the looming storms, some in government might be tempted to slacken the deficit reduction schedule to ease the pain, but the pounding to the Government’s economic credibility from such a move would be just as damaging, if not worse.

David Alexander was a senior adviser to John Howard's government in Australia and is a former economics editor of the Canberra Times who is now resident in the United Kingdom.

David Alexander: Increasing the tax on insurance would be a tax on prudent behaviour and send the wrong signal to responsible people

David Alexander was a senior adviser to John Howard's government in Australia and is a former economics editor of the Canberra Times who is now resident in the United Kingdom.

A little snippet of news in The Times £ a week ago should set alarm bells ringing – a suggestion that taxes on general insurance are set to double or more in the next Budget.

Hopefully this will turn out to be ill-informed speculation, because it would be a very inferior method of helping to address the budget deficit.

Economists are often pretty divided about most things but it is considered a no-brainer that insurance taxes are one of the most inefficient taxes in the revenue-raising spectrum. Taxes on insurance are taxes on prudent behaviour. They are a penalty on responsible people taking precautions against possible future adversity.

It would be hard to think of another revenue source that more proportionally impacted on responsible and prudent small “c” conservative people and businesses. Shifting the tax burden onto responsible behaviour sends all the wrong signals to the population and undermines the critical role that readily available insurance plays in risk management in the economy.

David Alexander was a senior adviser to John Howard's government in Australia and is a former economics editor of the Canberra Times who is now resident in the United Kingdom.

David Alexander: The Australian experience suggests that the Conservatives should not fear electoral reform

David Alexander was a senior adviser to John Howard's government in Australia and is now resident in the United Kingdom.

With the Labour Party having suffered a massive swing against them, the only hope of Gordon Brown retaining government is to offer the Liberal Democrats major electoral reform. Nick Clegg will be very tempted to grasp this rare opportunity. For the Conservatives this possibility should focus their minds on whether voting reforms should be countenanced as part of a negotiated deal in order to form government.

In my view there are many misconceptions amongst Conservatives about what voting reform might mean if applied in the United Kingdom, particularly as it relates to the Conservative Party itself. The significance of this is that these misconceptions may cost the Conservatives government.

Only one country in the world actually operates both Nick Clegg’s favoured voting system and Gordon Brown’s now-favoured voting system – Australia.

The Alternative Vote system now championed by Gordon Brown has operated in Australia’s lower house, the House of Representatives since 1918, and the Single Transferable Vote system that Nick Clegg likes most has been operating in the Australia’s upper house, the Senate, since 1949.

The first error is to think that the Alternative Vote (called preferential voting in Australia) would leave the Conservative Party in “permanent opposition”. In Australia, conservatives have been in government for 65 of the 92 years since the Alternative Vote was introduced. The Alternative Vote is no inherent hindrance to centre-right parties. To suggest that Australia is more conservative than the UK would be silly. In the medium and long-term the Conservatives would have nothing to fear from an Australian-style Alternative Vote, it is only the short-term that it could be an issue for the Tories, and more on that below.

David Alexander: If Gordon Brown had followed Australia's example, the British economy wouldn't be in such a parlous state

David Alexander was a senior adviser to the former Australian Treasurer [Chancellor] Peter Costello and is now resident in the United Kingdom.

One of the more improbable friendships of recent years has been that of British Prime Minister Gordon Brown and the former Treasurer of Australia Peter Costello.

Their friendship developed through their long stints as chief economic managers in their respective countries, with Costello’s period as Treasurer from 1996 to 2007 in the Howard government almost precisely mirroring the 1997 to 2007 stint of Chancellor Brown.

In 2006 Brown offered to host a soiree in Washington to celebrate Costello's tenth year managing the economy, a gesture declined due to prior commitments.

But while the two men personally got on well, the interesting aspect of the relationship between the two men concerns the divergent paths that both ultimately took on managing the economy, and how that difference has dramatically affected the fate of the two countries.

When both men came to power the initial phase for each government consisted of running budget surpluses and paying down government debt. The fork in the road came in 2000 when Gordon Brown and Tony Blair prematurely declared victory on debt reduction and announced a grand new goal of higher spending.

“It is this sustained and sustainable improvement in our public finances that makes possible a sustained and sustainable improvement in our public services,” Brown boldly declared upon releasing the fateful Spending Review of July 2000. Government spending duly rocketed upwards, and notwithstanding a prolonged revenue boom from the City large deficits opened up such that by 2008 government debt was again blowing out past 40 per cent of GDP.

While the deficits were piling up in Britain, the Howard government continued to pursue the rather less sexy goal of running budget surpluses and paying down debt.