George Osborne defends spending pledge

Speaking to Policy Exchange this morning the Shadow Chancellor mounted a stout defence of his commitment to match Labour's spending plans until 2010/11:

"David Cameron and I have been arguing for this long term approach to sustainable public spending for years.  Now the Labour Government have been forced by their own profligacy to adopt plans for the coming three years that halve the growth rate of government spending from 4% to 2.1%.  They too will be sharing the proceeds of growth. Not through choice but by necessity.  We do have a choice.

We can either: stick with our long term course; stick with the commitment I made to spending growth of 2.1% for the coming three years; review the final year when we know the state of the public finances; and understand that in an economic slowdown this will mean tight spending plans and difficult decisions about government priorities.  Or we can head off onto the margins of the political debate and reduce spending growth even further for the sake of a short term argument.  Never mind that it would probably be unachievable in a slowdown, when tax revenues fall and welfare spending rises.  Never mind that it would be lower than anything Margaret Thatcher achieved during the economic turbulence she faced in her first parliament."

ConservativeHome has not been campaigning for Mr Osborne to drop his spending pledge.  We never expected him to do that.  It would be too politically embarrassing.  Our campaign is to avoid another similar pledge that would prevent an incoming Conservative Government from beginning to reduce borrowing and/or taxation from day one and not have to wait until more than halfway through a parliament to begin what is urgently necessary.  Our belief is that we will win this debate.  Party members, the IoD, the TaxPayers' Alliance are on our side.  Leading MPs like Michael Fallon agree, too.  Most importantly economic imperatives are on our side.  The reduction of tax and public sector borrowing cannot begin soon enough.  Those reductions are not possible unless a Conservative government brings public spending under control and tackles public sector waste.  Waste btw was a word that did not feature once in Mr Osborne's speech.  Conservatives should be putting waste at the heart of the national debate.

We'll blog later on the rest of the speech and its very encouraging signals on wider tax reform.

1pm: Matthew Elliott of the TaxPayers' Alliance has posted his own reaction at CentreRight.

Comments

[john]

So Osborne is, rightly, sticking to his commitment but keeping his options open beyond that.

I doubt we'll get anything out of him on post-2011 spending plans for a while, and nor should we I suppose - who knows what the economy and public finances will look like by then.

So where does this debate go now? I guess it will die away and resurface nearer the time.

[Martin Coxall]

It certainly sounds like ConHome has already won the argument.

It reads to me like a thinly-veiled acknowledgement that the pledge won't hold beyond 2010 when we are in government and "we know the state of the public finances".

Congratulations on being the Shadow Chancellor's conscience!

[Will Stobart]

Sticking to his guns is a good thing politically, unfortunately I'm not sure it will win him much support from those already disillusioned with the idea of high spending and taxing.

I suppose we'll have to wait another 5 years until we can hope to see fairer policies on this issue. As long as it eventually gets done, I'm willing to wait.

[Umbrella man]

It is vital that ConHome maintains the pressure on this one...

[Henry Cook]

Does the Editor recall that Geoffrey Howe had to raise taxes in his 1981 budget in the middle of a recession? Given the astonishing amount of state debt building up at the moment, does the Editor accept that once in government George Osborne may be forced into a similar position?

The tax take rose by about 5% in GDP terms during the first Thatcher Government - overall tax cuts only appeared later once the mess created by previous Labour government had been sorted out. The late-00s are looking increasingly like the late-70s...

Tax cuts are great, but successful Conservative governments (of which Thatcher's was the most successful, in my opinion) always put sound money first.

[RobD]

Was there ever an argument? Did George or David ever say the pledge would be extended?

[Editor]

Henry: We are much more likely to have to raise taxes if we pledge to match unsustainable spending plans.

RobD: Perhaps George Osborne never intended to renew his spending pledge. I don't know but I want to increase the chances that he won't.

[Alex Swanson]

Never mind that it would probably be unachievable in a slowdown, when tax revenues fall and welfare spending rises.

Notice the implicit assumption here, that it is impossible to find any significant savings either from increased productivity or indeed from simply not doing stuff.

[Moral minority]

After Lord Forsyth's Tax Commission Report and the Report by John Redwood's Economic Competitiveness Policy Group, why does George Osborne need Lord Howe to chair another review of taxation policy? They told him how to cut and simplify taxes.

George Osborne has been Shadow Chancellor for two and half years. Kicking tax policy into the long grass by having another review is not acceptable. The last thing we need is another Tax Simplification Quango. A strong, principled and capable Chancellor would not need one.

Frankly, Osborne has only confirmed my view that he lacks the intellectual and political skills to be an effective Chancellor. His lack of professional experience outside the Westminster village requires him to rely on the views and judgement of others.

The Conservatives must give the public the confidence that we can deliver a dynamic and successful economy. Osborne does not inspire such confidence and is an electoral liability. Cameron must appoint a heavyweight Chancellor, probably Hague or Davis, to deliver a radical alternative to Brown's disastrous record.

[Mike Thomas (215cu)]

Good grief,

By all means campaign but if you know the outcome of the instabilities in the global and national economies around 2009 then please tell us all.

Otherwise, say nothing and let Labour's reputation for economic competence sink without trace. Let Labour suffer the full whirlwind of unpopularity of their decisions without the need to add the "We'll cut taxes" voice. That is tantamount to offering a life raft for Labour's Treasury.

I can remember Mr. Osborne's strategy as 'Sharing the proceeds of growth' as being roundly admonished by Mr. Brown several times. Now they are following it.

Economic theory says at this point in the economic cycle it's too late for tax cuts, there is no surplus to use for them and governments should have ran a current account surplus (they haven't) to cover increased government spending on welfare payments, encourage growth etc, etc....

Instead this government is £8bn short, taxes will rise.

Mr. Osborne has to make political capital out of that first.

You cannot simply jettison that at all by making 1980-esque "We will cut taxes" promises. The electorate are not that stupid, it might play well as a membership dog whistle but it doesn't play well with ordinary voters.

It's also economically irresponsible whilst so heavily in deficit.

[Alex Swanson]

there is no surplus to use for them

Make surplus by doing less and doing it better.

I find it astonishing that what is routine in every private company in the country should be regarded as so impossible in government that many people are apparently unable to even grasp the concept.

[Mike Thomas (215cu)]

Alex,

That's great but that takes time to do so.

Making reforms takes years, surpluses are in the bank so tax cuts can be made immediately.

I find it astonishing that people can't apply common sense whether in business or not.

[Alex Swanson]

Making reforms takes years

Not necessarily. Cancelling the pointless national firearms database for example could be done with the stroke of a pen. And I've never had it explained to me what exactly the British Army is doing in Cyprus.

Furthermore - while I agree some reforms would indeed take years - I see no evidence that Osborne and co would be interested even in starting. They seem to take it for granted that nothing at all could be done.

[Adam-]

Alex, bad example. Most of the money has already been blown on the National Firearms Database and can't be recovered. Also, I imagine that most of the costs of that farce were born by firearms certificate holders rather than ordinary taxpayers.

Now that you mention firearms, if the Tories want to review something useful, they could start by reviewing our overly complex and virtually useless firearms legislation. There is no benefit in having such a pedantic and bureaucratic licencing system if a criminal can just bring his sub machine gun in through the 'Nothing to Declare' aisle.

On the other hand, our Firearms laws are very handy for a useless Police force needing to pad out their "gun crime" figures with the unusual non-crimes. Nobody cares that they shopped a clay pigeon shoot that hadn't filled in the reams of paperwork required, or some hunter was arrested for taking game on a Sunday, but these are all "gun crimes" that help put the ticks in the boxes.

I reckon the law could be simplified into a single paragraph without any threat to public safety.

David Davis. Are you listening?

[Alex Swanson]

Most of the money has already been blown on the National Firearms Database and can't be recovered.

This is the Concorde fallacy - the idea that if lots of money has already been spent on something then it doesn't matter if you spend more. Money could still be saved.

The rest of your post, though, I seriously agree with.

[christina speight]

Oh dear! I'm desperate to get rid of Brown's shambles of a government with one betrayal and shambles after another.

Two thinmgs have to fall in place before I wikll go back to voting Tory though.

One is the EU and on that I'm holding my horses for now.

The other is taxation. If Osborne won't listen and stop hitching his wagon to the falling star of Brown's tax levels when the economy is sliding inexorably into recession there's no hope for Britain in any party. It's unbelievable; hasn't he noticed that circumstances have changed. He should follow Mark Twain's comment - - "When circumstances change, I change my mind. What do you do?"

[federica smythe]

very, very revealing.....

many of us have wanted to know what the meaningless formulation "sharing the proceeds of growth" actually meant... now we know as George has let the truth out of the bag..

quote ..."...have been forced by their own profligacy to adopt plans for the coming three years that halve the growth rate of government spending from 4% to 2.1%. They too will be sharing the proceeds of growth.

so sharing the proceeds of growth includes raising taxes as increasing deficits.

There is no pledge to reduce taxes as a % of GDP through the cycle, which is what is required.

[David Sergeant]

"George Osborne has been Shadow Chancellor for two and half years. Kicking tax policy into the long grass by having another review is not acceptable."

Saying this sort of thing years before an election makes one wonder if moral minority is either a lefty trying to reduce Tory support or is writing this nonsense while being supervised by men in white coats.

[Moral minority]

"Saying this sort of thing years before an election". Only 4 months ago we were preparing for a snap general election. It's David Sergeant who is the loony for thinking that we did not need a a tax policy at that point.

[Mr Angry]

If George Osborne and David Cameron cannot see that there is so very very much that the Labour Government does (especially in terms of oppressing and repressing the citizenry) that we should not do then there isn't any point in working to elect them to Government.

There is massive scope for savings in public expenditure just by doing away with Labour's army of political correctness enforcers, box tickers and left wing social engineers alone.

Whether the savings from this very necessary surgery go to be spent in other areas of genuine need or are channeled into a reduction in the unsustainable tax burden upon ordinary people is a different debate. But for them not to properly acknowledge the necessity of, and then work towards, a meaningful reduction in the size of the state is a disappointment of the greatest possible order to anyone who is actually a Conservative as opposed to a LibDem in drag.

[toryinsingapore]

So for whatever it's worth.

Was at a party in Singapore last night and met two Welsh girls. They are very very anti-Labour, think Brown is a total tosser...and yet, also believe that Cameron is a total toff who they could never vote for.

These are potential Tory voters, and yet they won't vote Tory as long as that Etonite is in charge.

I think- and will the very left Wes. Village group even allow us to say this- that we have totally Blairized the Conservative Party and it will not lead us to a majority.

The even more sad thing is that when we lose the next election (and it will be a great tragedy) the Cameron shock troops will say we have to move even more to the left.

I'm done.

I will not vote Conservative, not now, not while this junta is in control

I do not suspect I'm alone.

Good luck though!