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”
Mr. Sensible
John, what the IMF and others, including the OBR have done is downgrade the growth prospects for the economy.
If you have slower growth, you stand less chance of cutting the deficit.
John Green
Mr. Sensible,
The economy will grow at a slow rate for some considerable time as we recover from the legacy left by the New Labour coalition.
As the IMF have stated, and what most other sensible people recognise, is that the Government is on track to abolish the deficit without the prospect of a “double-dip” recession.
Darling’s plan, still shrouded in the utmost secrecy, is to increase the yearly interest payments on our sovereign debt from £44 billion to more than £70 billion. Some plan.
Anon E Mouse
Mr.Sensible – The IMF has stated that it feels the position of the government is the correct one. You are on the wrong side of the curve (again).
This debt is a result of the financial incompetence of the last government – why do Labour constantly bang on about the bankers when they forced Gordon Brown on the electorate?
Gold sales, “End to boom and bust”, “Lead the G20 out of recession” etc.
And when the chancellor Alistair Darling said Brown was wrong on the economy, which he clearly was, the “Forces of hell were unleashed” on him. By his own party. Charming.
It appears that Ed Miliband will make these points in his speech this afternoon. I do hope that after that people will stop this deficit denial.
The fact is you can wrap this lot up however you want but the government is correct to take a risk – that’s it’s right. Labour and all the doom merchants are wrong. There won’t be a “double dip” recession.
Move on all.
Mr. Sensible
Guys that clearly isn’t washing with the public.
http://www.guardian.co.uk/politics/2010/sep/28/ed-miliband-poll-labour-conservatives
And 2 nobel prise winning economists have said that this is the wrong approach.
And the fact is that the government’s own Office for Budget Responsibility has predicted over half a million job losses and that’s just across the public sector.
For all this to happen, the economy has to be growing in the first place. You might find the second comment in this article interesting:
http://www.guardian.co.uk/business/2010/sep/27/george-osborne-imf-backs-cuts?CMP=EMCGT_280910&
John Green
Mr Sensible,
Of course there will be large numbers of jobs lost in the public sector. That is one of the main points of the exercise. These wealth-consuming jobs must be moved into wealth-creating jobs in the private sector. The challenge for the government does not stop with abolishing our mountain of debt. It must create a self-sustaining economy for the future; one not reliant on growing sovereign debt, the discredited approach of Blair, Brown et al.