The big split on deficit reduction is between Labour and Tories. The totality of Tory cuts' plans are almost twice as severe as Alistair Darling's proposal.
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.”
The statistics came from Matt Hancock’s recent document ‘What would you cut, Mr Miliband?‘ but were first used in George Osborne’s Budget speech when he said:
“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.
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13 Responses to “The big split on deficit reduction is between Labour and Tories”
idle pen pusher
“The total cut to spending planned by Osborne, Hancock and co is £83bn or £76bn if you take out the debt interest savings.”
Why do “cuts” of £83bn lead to £7bn saved interest payments when £44bn also lead to £7bn. Surely it’d be at least double that figure. Probably more due to lower rates required to attract investors with a more conservative debt strategy?
Paul Dean
If you think 61 is “almost twice” 44, then we do indeed have a very serious problem.
John Green
The real split on deficit reduction is between Labour and the IMF and almost every independent financial expert and forecaster, and think tank.
Ash
I had the same query as ipp on debt interest payments – shouldn’t that £76bn figure be somewhat lower?
Interesting to note that £7bn of the ‘spending cuts’ Labour signed up to are actually just debt interest savings (rather than cuts to spending on public services). The more I look at figures like this and think about options to do more on tax, the more I’m convinced Labour can set out a credible deficit reduction package that doesn’t involve cuts on anything like the scale the Tories are proposing.
(For instance, in 2014-15 – going by these figures – they’d need to endorse ‘only’ £29.5bn of real spending cuts, with a further £7bn achieved through debt interest savings and £36.5bn from tax rises. Compare that £29.5bn with the Tories’ £76bn…)
Ash
Going back to your ‘responsible deficit reduction plan’ then Will: of that £28.5bn of spending cuts, presumably only £24.5bn are actual cuts to spending on public services (since debt interest savings of £4bn are expected by 2013-14).
Compare that to the Tories’ proposed £59bn (£63bn – £4bn debt interest savings) – exactly double. Now that’s a clear and striking difference Labour could be drawing attention to.