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What's the point of a Star Chamber?

One would imagine from David Cameron's speech today that George Osborne will spell out "savage" cuts - I borrow the word from Nick Clegg - in his emergency budget later this month.

Looking at the political cycle only, it would certainly be best if the Chancellor announced drastic reductions in the rate of spending growth as soon as possible - because it's usually best to get any economic pain in early.

However, this is very unlikely to happen.

This is because Cameron, Clegg and Osborne aren't in a position simply to look at the political cycle, and act accordingly.  They're hemmed in by decisions taken before the election.

Osborne announced before the poll that a new Conservative Government would reduce this year's spending by £6 billion - a mere one per cent of the total.  This move coincided with the Party softening the "age of austerity" approach which Osborne outlined at last October's Conference.  Cameron said in January at Davos that any early reductions would be "modest".

Why the shift to reverse gear?  Because Labour was warning that bigger cuts would tip the economy back into recession - and because either Cameron, and possibly Osborne too, believed that the voters agreed, or thought that Labour were right, or both.

So the budget is likely to set out further details of where the £6 billion or so worth of reductions will fall, and spell out some big tax rises, too.

The Chancellor - backed up by new Office of Budget Responsibility, operating in shadow form - will also, presumably, prepare voters for pain to come, taking his cue from the Prime Minister's speech today.

Like the famous fat boy in Dickins, Cameron might as well have said today: "I want to make your flesh creep."  Instead, he used numbers to achieve the same effect. We're borrowing £770 million, over 11 per cent of GDP.  The national debt is set to double to £1.4 trillion in five years - £22,000 for every man, woman and child in the country. We're due in five years to spend more servicing debt than on schools, transport and climate change combined.

And so on.  But, for reasons already explained, he didn't announce severe cuts. Indeed, he didn't even set out the Canadian-type programme for making them briefed out to the Daily Telegraph this morning here.

That programme will presumably be made much of during the budget - especially the consultation with voters.  The Prime Minister and Chancellor are desperate to avoid the charge of planning Thatcher Cuts, Mark Two (even though, as readers know, there weren't cuts under Thatcher: public spending rose each year). Hence the manifesto pledges to protect the incomes of poorest workers from the coming pay freeze and restrict any tax breaks for marriage to standard rate taxpayers.

Given where the new Government's starting from, all this is sensible enough - with the exception of the proposed creation of a new Star Chamber of senior Ministers to examine departmental spending.

What's the point of such a body?  Thatcher had a Star Chamber, chaired by Willie Whitelaw.  But its remit was to consider cases in which the Treasury and Departments couldn't agree - not, as the Telegraph story suggests, to review each Department's spending automatically.  That's surely what the Treasury's for.

The story also suggests annual spending reviews.  After all, the purpose of Thatcher's Star Chamber was precisely to adjudicate over the annual public spending wrangle. But a review every three years, and no Star Chamber, would surely be preferable to annual reviews plus a Star Chamber.

Brown instigated three year reviews.  He postponed one in 2006 - so that he could announce its results after becoming Prime Minister.  And he postponed another before the last election.  That's why Osborne has to have one in the first place.  He should use the Budget to announce a permanent return to three year reviews - backed up by the Office of Budget Responsibility.

Paul Goodman


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