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Osborne in China

Never mind the speech, never mind the £25 billion – the key moment of George Osborne’s big day yesterday came during his interview on the Today Programme. I mentioned it in my post yesterday, but it’s worth giving further consideration to. It was the way he summarily dispatched the idea of withdrawing benefits from wealthier pensioners with the claim that doing so would only save “tens of millions” of pounds.

I said at the time that “cuts to universal benefits could save more than the Chancellor suggests”. And then the FT’s Jim Pickard put a number on it: £4 billion. That’s how much the Government could save if it decided to scrap benefits such as free TV licences and the Winter Fuel Allowance altogether. Even just removing them from wealthier pensioners would save hundreds of millions. That’s somewhat more than the “tens of millions” claimed by the Chancellor. It’s also comparable to some of the policies Osborne has already introduced, or is keen to introduce, such as cuts to the spare room subsidy (or whatever you want to call it) and cuts to housing benefit for those earning over £60,000 a year.

So why’s he scoffing at this idea and not the others? Politics, of course. Not only does the Chancellor know that pensioners – particularly well-off pensioners – are a traditional source of Conservative votes, but he also has David Cameron’s pre-election pledges to consider. As Prime Minister, he might have just abandoned his promise not to cut pensioner OAPerks, but he’s not like that. As Benedict Brogan says in his Daily Telegraph column today, “In the mind of David Cameron, broken promises carry a particular toxicity.”

But, as I’ve argued plenty of times before (for example, here and here), the politics aren’t just in favour of keeping pensioner benefits untouched. In fact, Osborne is encoding a particularly dangerous inconsistency into the Tories’ message. On the one hand, child benefit payments to wealthier families are “difficult to justify” during a time a spending retrenchment. On the other, money for old millionaires! And, all the while, the Tory leadership insists that we’re all in this together.

And what of the internal Government politics? This morning’s newspapers tell us that both Iain Duncan Smith and Nick Clegg are raging against Osborne’s announcement of another £12 billion of welfare cuts after 2015. Yet here’s the thing: these two ministers could have been pacified, even if only slightly, by the prospect of pensioner perks getting the chop – as it’s a policy they both support. This isn’t just important for the happiness of the current Coalition, but also for the possibility of any future coalitions. What Osborne intends to do after the next election is already a sore point between Tories and Lib Dems. The Chancellor is merely, currently, prodding at that wound. He could come to regret this in the event of another Hung Parliament.

There’s another problem, aside from the political ones, that Osborne is creating for after 2015: just where are all these £billions going to come from? Finding an extra £12 billion of welfare cuts is going to be, in the words of the Institute for Fiscal Studies’ Paul Johnson, “tough”. Cutting housing benefit for the under-25s might make the Exchequer a £billion or two; restrictions on housing benefit for those earning over £60,000, a little bit more – but what else is there? The Chancellor is restricting his range of answers to that question by leaving out the elderly. Pensions, a massive and increasing portion of government spending, are being protected. And pensioner perks are wrongly dismissed as too small to bother with.

And it doesn’t stop there: health spending, as we all know, is also being shielded from cuts because of – oh yes – politics and another promise that Cameron made before the last election. Here at ConHome, we’ve long argued for a proper, nothing-off-the-table audit of state spending and where it might be cut. The Office for Budget Responsibility has done its part by highlighting the fiscal dangers of an ageing population. But the Tory leadership is, as it likes to remind us, sticking to its plan. They want to cut, cut, cut – but they simply don’t want to consider every idea for cut-cut-cutting.

134 comments for: Osborne has set himself the task of finding every cut he can – so why’s he not doing that?

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