What do the Tories need to say about cuts?

The biggest challenge for the Conservatives between now and the election is to tell the electorate enough about their fiscal plans to ensure they have a post-election mandate but never enough to imperil an election majority*.

In meeting that challenge they are getting somewhat conflicting advice from centre right think tanks.  The TaxPayers' Alliance and Reform are urging “meat not mood” with regard to intentions.  Policy Exchange and the Centre for Policy Studies argue that big principles rather than long lists are more what is required.

In April, Reform's report ‘Back to Black’ set out £30 billion of cuts and argued that no budget should be protected.  The TPA (with the Institute of Directors) published a report last week that set out £50bn of spending cuts. This week, Reform's Lucy Parsons welcomed Vince Cable's list of £14bn of spending cuts which Reform had published.  She concluded that "his proposals will do much to engage the public in the tough choices the UK faces" and concluded that it was "the kind of credible plan that the public is still waiting to see from the Conservative Party.”

Andrew Lilico, Chief Economist of Policy Exchange, had already set out a different viewpoint (also on CentreRight). He argued against an explicit list of cuts – partly because of the sheer scale of deficit reduction that is going to be necessary.   He calculates that a £100bn adjustment will be necessary to take Britain back towards sustainability.  Lilico argued that “cross-cutting themes” including a “general policy towards public sector pay, pensions or the general approach to procurement” should play a much larger role than specific cut suggestions.

Andrew Lilico’s argument is backed by Jill Kirby of the Centre for Policy Studies. Talking to ConservativeHome, he CPS Director said that direction of travel is more important than a ‘shopping list’ of cuts. It should be remembered that –also facing a dismal economic inheritance - Margaret Thatcher did not set out line-by-line cuts but made strong arguments about her intentions.  She said that exercises by think tanks (and our own ‘StarChamber’,) were still “very useful” for an incoming government but politicians did not need to specify which they would sign up to. The TPA agrees that the Tories do not need to publish an exhaustive list of cuts but examples that add up to double-figure billions are necessary in order to gain credibility with the public and the media.

Policy Exchange’s Neil O’Brien worries that ‘big lists’ are difficult to translate into government. Many of the necessary cuts will only be clear when Cameron/Osborne are in government and after the whole of Whitehall has been enlisted in a delegated search for efficiency. O’Brien also worries about crude across-the-board freezes in public sector pay when the last decade’s growth in pay has not been across-the-board. Pay for health-related workers has gone up twice as fast as for the police, for example.  Should all now suffer equally? No.

David Cameron and George Osborne have made their intentions clear in some important regards.  There are five areas of particular clarity:

1. They have said that there will be cuts but have not yet specified a scale of cuts that will restore Britain’s public finances. Shadow Treasury Team sources attribute this, in part, to a lack of certainty about future economic growth.
2. Last week’s speech on the pay of ministers and the perks of MPs made it clear that the political class will share the pain of adjustment. This is an important step towards possessing some moral authority in ‘the age of austerity’.
3. The ‘rich’ will share the pain, too.  There’ll be no early reversal of the 50p tax rate and there are (as yet unspecified) warnings about axeing tax credits for those earning £50,000 and more.
4. The Tory commitment to ringfence the NHS and international development  budgets – but not, for example, defence – makes it clear that Cameron is a different kind of Conservative leader.
5. The party will hold an emergency budget soon after winning office in a sign that the course of economic policy will change quickly.

In my mind there are three things that the Conservative Party still needs to do: (1) It has not made it sufficiently clear that the next few years are going to be painful; (2) It has not reassured that any tax rises will be temporary and (3) We haven’t yet had a big ‘to-the-camera moment’ that can be used in the years ahead to say ‘we have a mandate to make these difficult cuts’.

Taking those three points in quick succession:

(1) THE NEXT FEW YEARS ARE GOING TO BE PAINFUL
George Osborne’s speech to Demos in August was a mistake in this regard.  He came close to saying that public service reform would be enough to put things painlessly right. That’s the wrong strategic message.

(2) ANY TAX RISES WILL BE TEMPORARY
The Conservatives (somewhat dubiously) have protested that they are not even discussing tax options. When they do discuss tax options they need to insert sunset clauses into what they propose. Every Tory message on the budget must show that there is light at the end of the tunnel.

(3) THE BIG TRUTH-TELLING MOMENT
David Cameron needs a look-into-the-camera moment that gives him the mandate for the tough times ahead.  I’m thinking of something like George H W Bush’s 1988 ‘Read my lips’ passage. It’s not an ideal example because Bush reneged on his promise but Bush made a promise to keep taxes down. Cameron will be making a very different promise – of austerity. My point is it needs to be a high-impact moment of candour.

What the Conservative Party needs most of all is what Lord Lawson has called a doctor's mandate.  The patient knows that it is ill and that illness has produced a fear of the future.  The patient does not need to know exactly how the doctor intends to make them better but they need to know that there will be a period of discomfort associated with the medicine, a period of convalescence and then every prospect of a return to full health.     

Tim Montgomerie

* Honesty about intentions and size of victory do not have to be in conflict.