Tea-leaf democracy, by Colin Talbot

9 Sep 09

The public spending debate in the run-up to the next election is going to focus on cuts: how much, how fast and where?

Labour is edging towards saying that, yes, public spending will have to be cut – the most significant announcement was Chief Secretary to the Treasury Liam Byrne saying that Labour would cut the deficit by half by 2013. More will come in the Pre-Budget Report in the autumn. Labour – or rather PM Gordon Brown – has been wary to the point of paranoia about admitting that spending will have to be reined back. But it is now edging towards accepting it.

Ironically this could be Labour's best political strategy – the more specific ministers are about how much, how fast and where, the more they will force the Tories on to the defensive. It’s okay for David Cameron and George Osborne to talk endlessly about being honest and tough – the more Labour puts figures and timings on to public spending restraint the more surely the Tories will be forced to say how much further and faster they would go, to their potential political disadvantage.

At the moment the Tories' plan seems to be to make a great many rhetorical statements but say as little as possible about specifics before the election. This might be sensible from their point of view – the opinion polls seem to show public sympathy for 'cuts' in the abstract but greater reticence about specifics. But how long they can sustain this is doubtful – not just the electorate but the markets will want to know more about what their plans are and how credible they are. Leaks about post-election emergency Cabinet 'away-days' to finalise cuts plans won’t inspire confidence that they really know what they’re doing, not to mention the little issue of whether or not it’s democratic to go into an election not spelling out what you actually plan to do.

The  ‘accepted wisdom’ is that the current level of public borrowing is unsustainable. The reality is a bit more complex. The present and projected levels of public debt are indeed high, and very high relative to British public debt over recent decades. But by international comparisons, at least the ones that matter in advanced countries, they are not especially high – the US’s deficit is worse and shows no signs of getting any better even in the medium term. Nor are the economic or financial impacts of higher levels of public debt in the longer term as certain as a lot of the political class and commentariat seem to assume.

All the focus so far has also been on spending – when Margaret Thatcher came to power in 1979, pledged to be more fiscally conservative, her government doubled VAT.

So the questions that need to be asked again and again and again to leaders of all the parties are simple. If you think public spending needs to be reined in and public debt reduced: by how much, how quickly and where? So far the answers have been frankly pathetic. What a change from a mere two years ago when the two main parties were like twins on public spending and tax plans, with only minor differences between them. Then we knew what both of them planned, now we’re reduced to trying to read the tea-leaves to figure out what they would do. Not a happy state for a democracy.

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