George Osborne must not renew his pledge to continue Brown's spending binge

Over the last few years Brown has presided over a massive growth in the size of the state.  The low tax economy built by Margaret Thatcher and John Major is being undone.  Britain plc is becoming less competitive.  Parts of our nation are being 'Soviet-ised' as Labour 'buys votes' in its heartlands.  Waste in the public sector is well-documented.  And are taxpayers getting value for money from the extra 100-and-more taxes that have been levied?  The question answers itself.  Gordon Brown has been on a spending binge and it's time for some sobriety.

Graeme Leach, Chief Economist of the Institute of Directors, agrees that there is a major problem:

"In the absence of war or recession the public spending build-up since 2000 has been unprecedented. No political party is facing up to the need to restrain public spending as much as is needed. The IoD has called for public spending growth to be kept to 1.5 per cent per annum not just for the next CSR but the following one as well. If we're to reverse the wasteful build-up over the past decade tough decisions will have to be made. Without them high tax and spend will progressively undermine our competitiveness."

Last September George Osborne signed up to Labour's spending plans until 2010/11.  That decision is unpopular amongst Tory members.  Our monthly polling of the Conservative grassroots shows that they oppose the pledge by 64% to 24%.  It's vital that Mr Osborne's pledge is not renewed as we get closer to a 2009 or 2010 General Election.  George Osborne needs to allow himself more room to cut borrowing and/ or introduce economy-reviving tax relief.  As it stands the Shadow Chancellor has left himself with fewer and fewer options.  See the graphic below:

Corin Taylor of the The TaxPayers' Alliance agrees that it's time for restraint:

"It was always wrong for the Conservatives to commit to matching the Government's spending plans. With an economic slowdown on the way, increasing spending at 2% could mean higher taxes, the worst possible thing to do in a recession. It shouldn't be beyond the wit of the Shadow Treasury team to find savings, reduce unnecessary government functions and so create room for much needed relief for overtaxed families and businesses."

ConservativeHome believes that spending growth of 1.5% is almost certainly enough.  That is the IoD's preferred level of growth.  That would give a Conservative Chancellor almost £3bn extra each year to deploy.  That could be used to reduce borrowing.  It could be used for economy-boosting tax relief - tax relief that will partly, if not wholly, pay for itself.  £3bn for example would almost pay for 2p off Corporation tax.  Alternatively it would nearly pay for a penny off income tax.  Less economically useful but more politically potent, it could be used to buy some relief for council taxpayers.  Council tax is now Britain's most hated tax.

David Cameron promised to share the proceeds of growth.  There is a real danger that the already bloated state will gobble up all of any proceeds if the Tories insist on continuing Labour's spending splurge and do not take strong action to increase economic competitiveness.

We give the final word to Michael Fallon MP, a Tory member of the Treasury Select Committee:

"George Osborne showed how we can win the battle on tax. Lower public spending growth is the other key to cutting Labour's borrowing, and putting the public finances back in order.   We cannot keep spending more than we can afford to borrow."

***
As with all of the ten campaign themes that make up ConservativeHome's Agenda2008, we'll be providing monthly updates on this need for a Conservative government to deliver more responsible growth in public spending.  Two other Agenda2008 items have already been launched: (1) A campaign for fairer-sized seats and (2) A media policy that encourages more diversity.

Comments

[Thatcher's Legacy]

Nothing could be more important than this campaign. The British economy is heading towards terribly dangerous levels of state intervention. We can't change course fast enough.

[Wat Tyler]

Well done CH. We desperately need to see George's beef on tax and spend.

Frankly, given the likelihood of no election before April 2010, the pledge to match spending up to 2010-11 is probably fairly immaterial.

But it is vital we get some kind of "rules based" pledge for the next Parliament. However it's expressed (1.5% pa real growth or a Reform style "growth rule") we need that third golden rule.

In terms of spend driven fiscal policy, unfettered political discretion has had its day (see eg OECD work on "embedded" expenditure targets linked here- http://burningourmoney.blogspot.com/2008/01/fixing-hole.html )

It won't be easy to implement in an era of debt overhang and slow growth. But for all of our futures, it has to be done.

[James Maskell]

Editor, George Osborne also said that the Tories would not be making uncosted, unfunded spending pledges. However that rule has been broken before. Osborne hasnt been clear about how he will fund spending increases, especially since given the current financial climate its going to be pretty hard to ensure that the spending increases will be funded without borrowing more money.

[Malcolm Dunn]

Sorry,I don't support this at all.2 reasons. Making specific pledges on public expenditure two years before an election where we might be coming to power amidst a deep recession strikes me as very risky. Secondly it gives our political enemies ammunition when at the moment they have none.
Surely this a battle that we should be having once we are in power and when we have all the facts at our disposal.

[Editor]

If we wait until we are in office Malcolm and George Osborne has already renewed the spending pledge we will be handcuffed to Labour's plans for much of a Parliament. I think we need the debate now.

[Jennifer Wells]

Malcom Dunn writes "Making specific pledges on public expenditure two years before an election where we might be coming to power amidst a deep recession strikes me as very risky."

But that is what George Osborne has done. He has promised a me-too policy on Brown's spending plans for three years.
Conservatives should be planning to trim spending growth and limit the size of government.

[Alan S]

CH is in good company:

Ian Martin of The Sunday Telegraph urged us to stop Brown's spending juggernaut yesterday -

http://www.telegraph.co.uk/opinion/main.jhtml;jsessionid=HZ2WSC3TX3HAVQFIQMGCFF4AVCBQUIV0?xml=/opinion/2008/01/13/do1310.xml

[David Belchamber]

It is very important not "to frighten the horses" where education and health are concerned.

I would like to see firm, costed commitments made between now and the GE about the reduction in wastage of resources, the proceeds of which would be shared.

The wastage exists: this weekend a relation recounted to me his experiences of working for what was the DES. He left to go abroad for about three years, came back and got his old job back. After about a year he was so frustrated at the shambles there and general politicisation and ineptitude that he left.

They gave him a year's salary - tax free - and £2,300 to buy a computer with.

The mind boggles at the way they dole out taxpayers' money!

[Simon Denis]

Osborne is in a hole of his own making. He is either stuck to damaging levels of public expenditure or he must renege on what is effectively an election pledge. It would be all too easy for Labour to renew their charge of flip-flopping and to accuse the tories of deceit and parsimony if any sudden adjustments were made now. Perhaps if Osborne were to resign over the 500 million in order to bring Hain down by example, he could take the silly pledge with him. The way would then be clear for another shadow chancellor to say that clearly no solid promise to match Labour's spending would make any sense at this stage.

[Mike A]

"we will be handcuffed to Labour's plans for much of a Parliament".

Well, no - until 2012, so two years instead of the mandatory one.

Since most of what we'll want to do will need reviews and more work, it's not an issue.

[Tony Makara]

The inevitable economic downturn brings with it an entirely different set of circumstances and throws the question of government spending into the air. Government would be quite justified in arguing that many unnecessary spending programmes should be closed down in order that priority spending can be targeted towards essential front-line services. The public would understand and support such a move. In times of economic difficulty, government, just like everyone else has to be sensible about spending. So long as essential services are maintained the public would back reductions in spending to reflect a more difficult economic environment.

[London Tory]

I disagree with the ConHome analysis. It misses one crucial point. By not committing to match Labour's public spending plans, George Osborne opens up to the whole 'Nasty Party' line of attack again. Just when we seem to have nailed it. The debate about reduced public spending and tax cuts being for the greater good is too dry an argument to sell to the average floating voter. Labour will simply equate it to 'how many fewer doctors and nurses'. Lets get elected first, prove our competence for the first couple of years, then embark on the tax and public spending reforms we all want to see.

[David Cooper]

One way to ditch the pledge to continue the binge would be to substitute an approach of boldly asserting that there is obvious waste and extravagance all around, and that it will be a central pledge of ours to put a stop to it for the benefit of taxpayers everywhere. In response to Labour challenges as to what we would cut, the simple answer should be “all the fat that you have allowed to grow – you know perfectly well what it is and there is no need to spell it out.”

[London Tory]

David

We tried that approach in 2001 and 2005.

[passing leftie]

Personally, 3 out of 10 is a bit high for this mind blowingly silly policy. I'd give it a 1.

It's even more silly than when Labour followed Tory spending plans. Are you Tories or not? Do you want to offer an alternative? Then offer lower taxes and lower public expenditure rather than this non-sensical Lib Dem style fence-sitting.

[newmania]

Thatcher was signed up to Callaghans spending plans and Blair was signed up to Major`s taxes. It means nothing and this sort of thing is not helpful. The scent of victory in in your cavalier nostrils and you have gone hairing of into the far right where you will be cut to pieces by Brownite Rounheads .

Calm down Dears

[Umbrella man]

Graham Leach gets it exactly right.
Spending has never risen so fast in peacetime and Tories must tell voters that the party is over.
A party that continues to binge on spending is hardly conservative.

[John Makra]

Conservatives should not be terrified of the jibe "what public service will you cut?" when proposing reduced taxes. Make a tally of all client population Brown has recruited, their salaries and the quangos and their budgets, and there will be a clear achievable savings target. The people it will effect have never voted Conservative and never would do so anyway - yet some of them might actually find something useful to do.

[David Sergeant]

newmania is right, this debate now is utterly mad. If at the next election it is clear Brown's economy is in such a state that government econmy is top priority then talk cuts. But this won't be about tax cuts just spending cuts to balance the books.

To talk about it now is just suicidal, even if Osborne doesn't respond Brown and Labour will point at these crazy rambelings to demonstrate how silly the Tories are whatever the leadership say.

[SomeCommonSense]

Why do people have such a concerntration on what is spent and not output? We simply say, we will keep the quality and level of service the same, but cut the money we put in by stripping out all the pointless managers, quangos and waste. Simple.

[Peter W Watson]

Cut out the useless government (fake) jobs and you will have another 2 million on the dole. Deport illegal aliens (2 to 3 million) and the problem will be sorted.
HOW MUCH DOES COMMON PURPOSE COST THE TAXPAYER? 95000 government "employees" at £4500 pounds a throw? I think we should be told....................

[A long time Tory]

I supported maintaining the spending pledge previously as I could see it was there to address public misconceptions about the Conservative party.

However much has now changed, not least Labour's spending plans, so I think it is now perfectly reasonable to change the position on spending plans as Labour have changed theirs, their golden rules are broken etc.

[A long time Tory]

Incidentally, the more foaming comments must be from UKIP trolls on the site. I don't know why they don't set up their own site and then the two of them can talk to each other without the rest of us having to standby with a bucket of water.

[cell functions]

As it stands the Shadow Chancellor has left himself with fewer and fewer options.