Osborne promises tough approach to spending

Shadow Chancellor George Osborne will today promise to get tough on government spending:

"Let me make this clear to you, to my colleagues, and to my party. Both David Cameron and I believe that the Conservative Party will never win elections by promising to spend more than Labour.  And we will never persuade people that we have better long term solutions to issues like our national defence or our public services if those solutions simply involve spending more money.  We need a different approach."

He then goes on to promise to follow three tests for 'Sound Money' - sound money, he says, "being the oldest Conservative principle of all":

"First, the Stability Test. Economic stability will always be our priority. We will not cut taxes if that puts at risk the low interest rates and low inflation that families and businesses depend on. Investment in the NHS and our public services is founded on a stable economy so that must always come first.  So, given the current poor state of the public finances, we will not be making up front promises of overall tax cuts at the election – promises I couldn’t be sure I could keep.  Any specific tax reductions we propose – for example fulfilling our commitment to recognize marriage – will be paid for by specific tax increases on things like pollution.

Second, the Sharing the Proceeds Test. Over time and only when the country can afford it, we will move in the direction of lower taxes.  We will do this by sharing the proceeds of economic growth between lower taxes and well-funded public services. Over a cycle, the economy will grow faster than the state and the share of national income spent by government will fall.

Third, today I am for the first time announcing our ‘Manifesto Test’ on spending: no policy proposals with implications for public spending are Conservative Party policy until they have been approved by me and by David Cameron, passed by the Shadow Cabinet, and appear in our draft manifesto.  Let me make this absolutely clear: the Conservative Party has no commitments to spend more money in any department than Labour is currently planning to spend."

The Telegraph reports that George Osborne's intervention follows some embarrassment at Labour claims that Tory spending promises - on extra drug rehab places, the border police force and tax relief for marriage - will costs taxpayers between £8bn and £21bn.

Comments

[James Maskell]

For the love of God! Just when he was giving the right notes as was starting to sound like he knew what he was talking about. There are more holes in this than a Swiss cheese.

[Edward]

Sound stuff.

[anon]

So we are essentially going to be the same as New Labour, but we have a nice new leader and not that nasty Mr Blair.

What have we come to?

How about a commitment to cut the sheer levels of waste that exist within the public sector. Get rid of the quangos (the British Potato Council immediately springs to mind) as they have little to no impact on front line services. As all public sector departments to produce a percentage breakdown on the money spent on frontline and back office services. Prune the latter to move money to the former. Simply put, demonstrate that we will not damage front line services, but will ensure that they are subject to rigorous scrutiny of their spending, and fire (yes fire not shunt sideways or move to a different department) any senior managers who fail to deliver on their requirements. The public know that the money is being squandered and want to see some action. Not waffle about proceeds of growth.

[Og]

Well, he's got one thing right - when the electorate want big government, they don't vote for the Tories.

The obvious thing would be to advocate tighter, more efficient spending plans with a narrower focus, and to expose the wasteful spending and promise to end it.

Yet, these are all, on their own, the very actions Cameron has been so keen to avoid the headline writers getting hold of, because the inescapable conclusion to be drawn is that they mean smaller government (tax cuts), greater efficiency (tax cuts) and a reversal of the government's pay-roll bonanza (job cuts).

This is why Osborne finds himself unable to make any headway with reasoned argument. The above is all waffle. He needs to make the smaller government/more efficient/less wasteful argument at the same time as highlighting the sensible policies that will solve the problems of the NHS and improve education for all. But we don't know what those policies are.....

He is reduced to chanting mantra, and looks exposed every time a new idea (border police, marriage tax break) comes along which needs to be costed.

The most obvious flaw in the Cameron/Osborne approach is that after years of attacking Brown on stealth taxes (which went down well with the electorate, WHO PAY THE TAXES), they have stopped doing so because the corollory is that tax is tax whether collected by stealth or not and a tax cut is a public services cut.

I wish this Tory leadership would realise that they are pushing at an open door and resort to sensible Conservative economic argument instead of the mumbo-jumbo Steve Hilton writes to make them sound like social democrats.

[comstock]

Economic stability will always be our priority. We will not cut taxes if that puts at risk the low interest rates and low inflation that families and businesses depend on. Investment in the NHS and our public services is founded on a stable economy so that must always come first

Exactly the same words coulda come out of Gordon's mouth :D

[DavidDPB]

It's not an open door though. The Tories are simply vulnerable to claims by Labour that it will destroy public services. It's ingrained, whether it is valid or not.

Voters aren't always rational-yes, when asked independently about taxation they claim it is too high, and that they believe public services can be reformed while dropping the burden. However, mix it in with political parties, and they respond badly (from our perspective) to claims in response to any proposal about tax cuts that public services will suffer.

The way to combat that is pretty much what the party is doing. The priority is to take the sting out of such attacks. Then you can get on to making more considered arguments. If Labour continue to make such claims in the way they do at the moment, people will start to appreciate that they don't match up with the reality of what is being claimed, which is pretty moderate. This then does open the door.

[malcolm]

Comstock, if those words came out of Gordons mouth he would be lying (again). The idea that Brown will ever cut the overall burden of tax is ludicrous. He's had 10 years in which to do and much of his time as Chancellor has coincided with an economically benign world economy.If he hasn't done it now he never will.
As regards Osbornes' speech I'm supportive.I simply think it's the right way to govern.

[Og]

It looks like an open door to me. The government is deeply unpopular, as much for failing to improve public services as for Iraq and sleaze. The LibDems are rudderless and have for much of the last two years been a laughing stock. The wilderness years for the Tory vote were clearly over when Michael Howard managed to get the highest vote total in England at the last election, despite what was universally agreed to have been a poor campaign.

The door is open.

[Mark Wallace]

On defence, especially, spending more money is not the only solution but it would be a damn good start...

[Valedictoryan]

"The obvious thing would be to advocate tighter, more efficient spending plans with a narrower focus, and to expose the wasteful spending and promise to end it."

Two problems with that:

1. Every political party claims it's going to cut waste. It has no credibility. You waste your air-time on a message that, no matter how often you repeat it, people just won't believe.

2. Every public sector worker gets worried that their job is under-appreciated and might be in the firing line. So although you're waste cuts only target a few % of jobs, you create resentment in the whole public sector fears your government.

[thatcherite]

There is also a spending commitment to increase international development aid to 0.7% of GDP, i.e. double it. That would cost another £6 to 7 billion!!

It is easy to be generous with other people's money. Gideon is not fit for puropose.

[jorgen]

"Both David Cameron and I believe that the Conservative Party will never win elections by promising to spend more than Labour."

Why the backward conclusion in the first paragraph? Does that mean they would happily promise to spend more than Labour if that would win the election? The tests are totally openended too. They still do not sound committed at all to small government / low tax.

[real conservative]

Public school twit. Tell the truth about the public services.

[Edward]

The backward conclusion is because we're trying to attack spending - Brown's extra spending - as waste and a burden on the economy. That way the buck's pushed back onto Labour rather than it being on us and "how we'll afford our tax cuts". He's saying we'll be smaller than Brown, and aim to reduce the state tax-take, but trying to place the onus on them to justify how their spending increases won't overburden and damages the economy further.

[John]

This is exactly what Osborne should be saying. We need to look like a credible government in waiting. So many of the posts on this thread are living in a fantasy land not the real political world. He has made a clear commitment that they will cut taxes when they can afford it - what more do people want? We are now ahead in the polls on the economy, compared to being 23 points behind at the last election. If that isn't a sign that Osborne's strategy is right I don't know what is.

[Arthurian Legend]

I slightly disagree, Valedictoryan.

As a floating voter before the last election, I was impressed by the Party's claims about the savings to be derived from excising wasteful spending.

They just really disappointed me when they said that stopping £20 billion waste only meant £4bn tax cuts...

Provided that you can identify clear areas of waste, and the tax that you will hand by stopping that waste, I think you will have a good and credible message which will be believed (by at least some people).

[Shugmeister]

I do wish the politicians of today had the "testicular fortitude" of Mrs Thatcher. This banal drivel, written by spin doctors and double checked by pollsters, means I don't trust any of them. The choice now seems to be between an old etonoian or a scotsman, which one do you prefer the look of? The policies are pretty much the same.

[John Coles]

Note Osborne's comments on "national defence" - he will not increase the budget, so pity the Poor Bloody Infantry and say goodbye to the long-promised aircraft carriers. This from the party that one was instinctively in favour of strong defence and which had an armlock on the serviceman's vote.
Note also the curious use of "our national defence": what Osborne is implying is that changes will only be made on an international basis - i.e. EU-wide arrangements.
The man is another Blairite public-school buffoon, ignorant and uncaring of our history, who will be exposed in the next General Election campaign as the decadent, economic-illiterate he is.

[Dan Hassett]

I think that some of the posters in this forum are living in their own political bubbles, insulated from what's going on outside. At the last election, the electorate considered Labour more trustworthy on tax and the economy (bizarre, I know), so the Conservative pledges were not taken seriously. Therefore, the Conservative party has to work on ensuring that we are the party to trust on tax and George Osborne's doing a good job on that. The measures outlined above make sense and still make clear that, as Conservatives, we want smaller government and lower taxes, but won't turf granny out onto the street to deliver it.

[anon]

Dan, whilst I resent the accusation that some of us are living in political bubbles, I will step out of mine and ask why it is you think that the publics appetite for spending is the same now as it was in 2005?

There has been a realisation amongst voters that the money has been wasted and speaking to people on the door they are very much aware of the volumes of waste that can be trimmed and redirected (witness the spate of documentaries outlining the waste in the public sector).

Instead we are offering more of the same, therefore why would the electorate vote for us? As Shugmeister points out we are currently offering more of the same, and it is essentially a question of who do you like the look of more; Brown or Cameron? Not exactly a convincing electoral proposition is it?

[William Norton]

Dan Hassett: there are actually two bubbles. One is the "Shouting Louder" bubble you identify (which isn't shared, so far as I can see, by ConHome or the Taxpayers' Alliance) that we will sweep to power if we promise ever greater tax cuts etc etc. The other is the Commentariat bubble (which isn't shared, so far as I can see, by Osborne and Cameron) that promises of tax cuts are automatic election losers because they've been rejected before, people prefer spending on public services etc etc. Somewhere in between are most Tory members and supporters.

Whether you want to put taxes up or down, you won't get anywhere until you've worked out what you want the government to do, and how much it will cost. The welcome thing about Osborne's announcement is that he's decided to get the expenditure commitments under control.

Presumably, therefore, we have now returned to Year Zero on the manifesto. As we're on the brink of a few elections, it would be helpful to know which commitments have survived the Manifesto Test.

For example: is the "commitment to recognise marriage" mentioned in the Stability Test scrubbed by the Manifesto Test? What is the status of the drug rehab and border police proposals?

[Yet Another Anon]

The wilderness years for the Tory vote were clearly over when Michael Howard managed to get the highest vote total in England at the last election, despite what was universally agreed to have been a poor campaign.
They got 34.4% of votes in England, not much more than Labour but more a sign of how badly Labour did in much of England in 2005, still fewer votes in total than 1997 and the percentage vote in England the third lowest since 1832.

[Edward]

William - I think it's safe to assume we're standing by the commitment to fund the border police from the scrapping of ID cards. I don't think that's classed as an otherwise unfunded commitment.

[Denis Cooper]

As Osborne intends that both tax revenues and public spending would continue to rise under a Tory government, it would be more accurate and maybe sound less threatening if he said "tax rates" instead of "taxes", eg "Over time and only when the country can afford it, we will move in the direction of lower tax rates."

[A S 'Yogi' Yogeswaran]

James Maskell had said what most of us think and that includes the man on the No.11 Omnibus. GG Osborne is either mad or still in awe of Blair or both.

Blair had always signalled right but turned left. Now after 10 years of complete mismanagement, political correctness and a million extra public sector jobs the average Briton is taxed a lot more than in 1992. The effect of over-zealous H&SE and other clip-board functionaries, we have killed off a large number of entrepreneurial businesses - it may be true that Blair and Brown support the business community - but those are the huge here today gone tomorrow multinationals - and the engine of the economy the small businesses are not thriving any more.

For starters, GG could cut back on the nosey H&SE, abolish the numerous quangos, drastically cut the number of civilian jobs in the MoD and non uniformed jobs in the Police forces, cancel the proposed smoking ban enforcers and (wait for it James) cut back on funding for mickey mouse university degree programmes. Most importantly, put a freeze on all IT contracts and terminate all consultancy contracts.
Suddenly, there will be £50,000 million extra in the Government's coffers.

If the front bench tries to be all things to all men, the apathy party will be the real winner.

[Tories take as much tax as Labour]

the average Briton is taxed a lot more than in 1992

In 1992, total average tax take was 40% (tax freedom day being 28th May).

In 2006 in was just 2% more at 42% (tax freedom day landing on 3rd June)

The tax freedom day became, post Maggie became later and later long before Labour came to power, and the average for the Tories post-Maggie was 28th May only 3 days less than Labour.

It is complete myth and spin to suggest that the Tories overall tax take is materially less than Labour\'s.

Pop along to the independent Adam Smith Institute and check the facts for yourself.

[Game Over]

Blue Labour?

More like Old Labour now!

[nastytory]

"Tough on spending and tough on the causes of spending"
We will manage a stable decline in our economy as it goes further down the plughole - sorted!

[Goldie]

The next general election will, I'm afraid, turn on the very subject of this post: the Conservatives will NOT win a workable majority in parliament if they don't beat Labour on the economic front with a compelling narrative, particularly because Brown has been Chancellor for so long.

Cameron and Osborne realize this, I believe. They finalized their economic formula in May 2005 and have not varied it in any way, shape or form since then, nor will they until the general election.

Their formula derives from their belief that New Labour has decisively won the intellectual argument on public spending vs. tax cuts. They firmly believe that the British people are wedded to high public spending and the sum total of constituencies dependent on various forms of government spending together form a majority of the swing votes necessary to win a parliamentary majority.

Unfortunately, I believe that the message, the magic elixer of Cameron and Osborne, is fundamentally flawed, and Mr Osborne is particularly ill-suited to deliver the message. I believe this will ultimately result in yet another election defeat.

The "stability" test and the "sharing the proceeds of growth" test, in the end, mean nothing but a commitment to the current state of public spending. This in turn makes it impossible to offer the voters any meaningful tax cuts. This blunts the main line of attack against Gordon Brown, i.e. that he takes too much tax to deliver too little public services. Screaming "me too, me too" will not sway the British people to vote out the Government.

Mr Osborne comes across, alas, as too young, too arrogant, too insular, too smug, too inexperienced (and, indeed, and I say this as one from the same generation as Mr Osborne, he does not just come across as too inexperienced, he in fact *is* too inexperienced) to run the British economy. The formula of 'sharing the proceeds' is fundamentally illogical and Brown will eventually tear it apart. It will be the rock of which the Cameron Project will flounder.

[James Maskell]

My point about the holes is that weve already made clear spending pledges (no NHS cuts for one, malaria aid being another) and is now saying that we wont make any. Has he contradicted himself. Since hes essentially advocating a balanced budget idea, where are the savings coming from? Cant be schools or education, nor law and order/security...

How is Osborne going to pay for the already announced spending increases...basically, wheres the money coming from? Osbornes first priority is that of keeping the social aspects solid, therefore anything relating to taxation must wait. That suggests very strongly to me that tax decreases are the very last resort for Osborne.

Osborne has been doing alright as of late, so much so he was starting to make me think twice about my views on him as Chancellor. But with this speech, he's gone and blown it all away.

One more thing...was this the speech Osborne did in front of the CBI?

[Yet Another Anon]

Mr Osborne comes across, alas, as too young, too arrogant, too insular, too smug, too inexperienced
It isn't his age, rather that he didn't really have sufficent frontbench experience although with time he is gaining this, David Cameron and his cronies mostly seem to have had careers in the strange world of PR that has actually little to do with actually doing things rather than adding a gloss to things - this really is the major problem.