There has been much ink spilled today on the apparent split between Alistair Darling and Ed Balls on the pace of deficit reduction. But the difference over whether to halve the deficit in four or more years is nothing compared to the gap between Darling and Osborne. The latter’s plans are almost twice as severe as Darling’s.
The Guardian’s Nick Watt blogs today about Alistair Darling’s conference speech and sets out:
“Darling launched a strong defence of his proposal to halve the deficit over four years. This would have led to £44bn in cuts in total managed expenditure in contrast to the £61bn planned by the coalition.”
“We have inherited from the previous Government spending plans to cut departmental budgets by £44 billion a year by 2014-15.
“Because the structural deficit is worse than we were told, my Budget today implies further reductions in departmental spending of £17 billion by 2014-15 [ie £61 billion in total – a rise of 39%].”
The truth is rather more stark because of the Government’s spending review which includes additional billions of cuts. Table 1.1 of the Budget sets out the respective “total consolidation plans” of Labour and Tories.
Labour’s policy of halving the deficit over four years implied spending cuts of £39 billion by 2013-14 but the Treasury calculated that this would rise to £52 billion by 2014-15 (ie the course of the Parliament). The Treasury also outline in the small print that the “estimated debt interest savings” due to the cuts would be £7bn in 2014-15. Due to a rounding error £52bn – £7bn = £44bn.
The difficulty for the Government – and one of the reasons why their cuts programme will be so much more painful than Labour’s no matter what they pretend – is that the comparator figure is not £61bn. The total cut to spending planned by Osborne, Hancock and co is £83bn or £76bn if you take out the debt interest savings. It may seem like a pedant’s point but it matters because the gap jumps from 39 per cent to 73 per cent. In other words, the Tory cuts will be almost twice as bad as Labour’s.