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Tory Cabinet ministers and Lib Dems have one message for Osborne: Cut the ring fences

By Tim Montgomerie
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ImagesGeorge Osborne is getting a very similar message from his Conservative and Liberal Democrat colleagues: Lift the ringfences.

Liberal Democrats are telling the Chancellor that they won't accept further cuts to welfare if he isn't willing to cut richer pensioners' benefits and, potentially, also "gently trim" the budgets for the NHS, schools and aid. Unlike the Tories, the Lib Dems' 2010 manifesto did not promise to ringfence key Whitehall budgets or the perks paid to better off pensioners.

And from his Right, Tory Cabinet colleagues are also saying that the next round of spending cuts will only be acceptable if the whole of Whitehall shares in the pain. Cabinet ministers like Theresa May feel that she's already achieved the near impossible. She has cut the budgets of the police for the first time ever and without a breakdown in law and order. On the contrary, crime has actually fallen by 10%. Eric Pickles is equally proud of the cuts he has made. Cuts to local government have been frontloaded but there hasn't been a meltdown for Tory councillors at the ballot box. Public opinion polls suggest that voters are seeing through Labour attempts to 'shroud wave' while, for example, maintaining reserves.

Lib Dem and Tory Cabinet ministers are more or less united in saying that further cuts are going to be difficult if the ringfencing is lifted and probably impossible without those ringfences being lifted. The Chancellor is asking for about £30 billion more cuts in order to eliminatethe deficit by the middle of the next parliament. This next round of cuts may be the most difficult of them all. One senior figure in the Ministry of Defence told me yesterday that there was no fat left. "The armed forces, unlike the NHS," my source confided, "were squeezed throughout the Labour years. Further cuts will be devastating."

The Institute for Fiscal Studies has argued that if ringfences are left in place - ringfences for the NHS, schools, DFID and defence equipment, other unprotected departments would need to make cuts of 35%.

Andrew Lilico, ConHome's resident economist, has already argued that the ringfencing policy is not just impractical and economically efficient but also immoral. "How do people think it's absolutely harmless," he wrote, "to cut the benefits of the poor from what were already (one presumes by definition) subsistence levels whilst at the same time politically inconceivable to cut the pay of a doctor on £110,000 per year (the average GP salary)?" He continued:

"The political priorities - slash departments where spending hadn't risen; slash the benefits of the poorest; still fail to maintain the country's credit rating; under no circumstances contemplate cutting in the departments the spending rises in which were the key drivers of excessive public spending and an important cause of low economic growth - seem totally bizarre to me."

Last week the Prime Minister appeared to signal that the ringfence for the overseas aid budget might not be sacrosanct. He appeared to suggest that aid spending could be used by the Ministry of Defence so long as the MoD's work was humanitarian-focused. Perhaps NHS spending could be used to relieve pressures on local authorities' community care budgets? Perhaps frontline spending on schools and hospitals could be ringfenced but the salaries of teachers and nurses and doctors could be frozen in money terms for a longer period? Perhaps there need to be more redundancies in the education and heath sectors? If the British state is ever going to start living within its means these very hard questions cannot be ducked.


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