Conservative Diary

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Five observations on the Tories and cutting the deficit

(1) The prospect of an easy Tory victory does not excite the media. They'd much rather have a horse race and so their current inclination is to jump on any story that suggests the Tory machine is misfiring. The kerfuffle over the timing of Tory spending cuts has given the media plenty of ammunition in recent days.

(2) The Tories have committed to eliminate the bulk of the structural budget deficit by the end of the first parliament. This the most important of these five observations.

(3) The Tories now seem to be shifting the reductions in spending away from the first year. The Tories will make a start in cutting spending in year one but that start may be more modest than some of us hoped.  I think it is necessary to cut quickly because (a) international investors need reassurance and (b) because backloading cuts to the later stages of a parliament will make re-election harder.

(4) The Tories will get rid of most of the deficit by cutting spending. Labour will rely mainly on tax rises. In that difference is clear blue water.

(5) George Osborne plans progressive reductions in corporation tax as part of an overall ambition to "improve Britain’s international rankings for tax competitiveness" (one of today's slightly dull benchmarks). That's more clear blue water.

Tim Montgomerie


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