When visiting the dentist, I have never found there is much to be gained from contemplating in advance the pain which may be experienced. Nor do dentists generally advertise for patients by assuring you that they are ready to inflict whatever agony may be needed to sort out your teeth.
A similar psychology operates in the field of public spending cuts. Voters do not want to know how painful these are going to be, and politicians do not want to tell them.
Ed Miliband came under ferocious criticism for failing to mention the deficit in his party conference speech. Even his own side said this was a bit much. Yet it could be said he was simply reflecting public opinion. If voters wish to behave like ostriches, a politician who sticks his head in the sand may seem preferable to one who insists on declaring that the public finances have yet to be sorted out, which means there is a lot of pain still to come.
Yet by his silence on this subject, which he has maintained at Prime Minister’s Questions as well as at the Labour Conference, Miliband misses the opportunity to point out that the Government has not done what it assured us in 2010 it was going to do. The talk then was of getting rid of the structural deficit in the space of a single Parliament. But after ballooning, at the end of the Labour years, to over £150 billion, the annual deficit is still about £100 billion.
Indeed, over the last six months, the deficit has got bigger than it was in the same six months the previous year. No less a figure than Tim Montgomerie in his piece yesterday on this site accused David Cameron of “effectively abandoning deficit reduction”. Allister Heath, in the Daily Telegraph, described the latest figures as “downright shocking” and “catastrophically off-target”. He said he was most worried by rises over the last year in public spending: “The government ought to be tightening its belt, not opening the floodgates.”
The Spectator was just as dismayed, writing in its leading article:
“It emerged this week that, between April and September, the Chancellor borrowed £58 billion – £5.4 billion more than during the same period last year. Osborne’s original plan to eliminate the structural deficit by the election has been off course for a long time, but it is now going backwards. This is embarrassing for a Chancellor who is about to fight the next election on financial competence…Osborne has now given himself eight years to cut state spending – by just 3.9 per cent. This is not the work of an Iron Chancellor, more like a child peeling off a plaster slowly so as to minimise the pain.”
So Miliband could, if he was more adventurous, set out to ridicule Oltep (or “Our Long-Term Economic Plan”, as David Cameron calls it), by exposing the contradictions between the original prospectus and what has actually taken place. But this would require the Labour leader to set out what of any significance his party would do differently: something he is unable to do. For as Andrew Tyrie pointed out, when I interviewed him last week for ConHome, on the great question of deficit reduction, there is no “chasm” between the two parties: Labour just propose to do it a bit more slowly.
So although journalists are at liberty to say that the deficit should be brought down faster, Miliband is not. After four years as Labour leader, he finds himself in the inglorious position of being dragged along on Osborne’s coat-tails.
The same humiliation was inflicted on the Tories when they were in opposition: for year after year they were dragged along on Gordon Brown’s coat-tails. Osborne and his friend Danny Finkelstein devised a “baseline” theory of election campaigns, to explain why this was happening. Janan Ganesh provides, in his biography of Osborne, The Austerity Chancellor, a useful account of the theory:
“Whatever the government’s overall fiscal plan going into an election, it will be treated by the media and voters as the baseline, or common sense position. Any proposed deviation from it by the opposition will be scrutinised remorselessly. If it is a Labour opposition proposing to veer off a Tory government’s baseline, this will be presented as a plan for tax rises. John Major’s devastating campaign against Neil Kinnock’s ‘tax bombshell’ in 1992 was just such an example. If, on the other hand, it is a Conservative opposition proposing to deviate from a Labour government’s baseline, this will be equally vulnerable to attack as tantamount to spending cuts. 2001 was proof of this, and so was 2005. The only route out of the trap is simply to accept the government’s baseline, as Gordon Brown did in 1997 – the only election campaign in the past twenty years in which the opposition did not haemorrhage votes over its fiscal plans.”
Yet in 2009, Osborne took the grave risk of decoupling himself from Brown’s plans. In June, Osborne said that whoever won the election, spending would have to be cut, and in his party conference speech in October, he began to specify the cuts the Conservatives would make, including a freeze in the pay of public-sector workers earning over £18,000 a year. Immediately after this speech, he said to his team: “Now let’s see if I’ve cost us the election.” And it is unfortunately the case that soon afterwards, the Tories’ lead in the polls began to diminish. Osborne was behaving like an awkward young dentist, perhaps of some technical ability, but with the tactless honesty to tell you this is going to hurt.
But if Osborne had not said something along these lines, how on becoming Chancellor could he have introduced cuts of between 28 and 35 per cent in Local Government, the Home Office, Environment, Culture and Justice, or indeed of 59.5 per cent in Communities (the social housing budget)? The cuts are summarised by the Institute for Fiscal Studies in a paper by Carl Emmerson and Gemma Tetlow. Earlier this week, Tetlow told ConHome: “In this Parliament the cuts that were planned have actually been made.” She agreed that making cuts in the next Parliament will be more difficult, because a lot of the easiest cuts have already been taken. But she added that there would indeed have to be more cuts: “We have only seen slightly less than half of the public service spending cuts that are implicit in the Government’s plan.”
Osborne warned of these cuts in his recent party conference speech:
“The budget deficit is approaching half what it was when we came to office, but it is still far too high. So we will see through our plan to eliminate it…We can either pretend to the British people before the election that this can be done with hardly any cuts…Or we can level with people now, and tell them the kind of difficult decisions that are still required to fix the economy.”
I confess that although I was in Birmingham for the conference, I somehow managed to miss Osborne’s speech. There were many other things going on, and a fringe meeting I was keen to attend, but the main reason I missed it is that like the average dental patient, I didn’t want to hear about the pain to come. The promises Cameron made of tax cuts were a lot more attractive. It is possible to construct from those promises a narrative of irresponsibility: to accuse the Tories of giving up on deficit reduction. But I haven’t found, while writing this article, any evidence for this narrative. What I have instead found is evidence that Cameron and Osborne are pursuing a very carefully thought out strategy. It may or may not succeed, but it is far more formidable than anything devised by Labour.
Cameron misleadingly tries to sell what they are doing as a plan: a term with Soviet connotations not just of command and control, but of rigidity and inflexibility. They have actually maintained an admirable regard to circumstance: when growth failed to return, and the deficit therefore failed to close, they quite rightly extended by several years the period in which they proposed to achieve this. One can, if one wishes, mock them for not getting where they announced, with such preposterous fanfare, they were going to get by now. But most of their critics think it would have been madness to stick to the original timetable. For Labour, the problem is that Osborne has actually been quite respectful of the conventional Keynesian wisdom.
In the present Parliament, the Tories and their coalition partners made the cuts they said they were going to make. Many of us still remember the relish with which David Laws, the Lib Dem Chief Secretary to the Treasury, started out on this mission in May 2010: it was as if his whole life had been a preparation for this hour. He was almost immediately succeeded by Danny Alexander, who proved no less adept at the work. It is hard to imagine that Labour, if it wins the next election, would show the same resolve. Labour spending ministers would be deeply resistant to cuts, which would contradict their deepest beliefs about why they went into politics.
The reason why is the deficit is still so alarmingly large is not that the Coalition shrank from making cuts, but that tax revenues have not bounced back in the way that was predicted. In Tetlow’s words, “The UK economy is going to be smaller than we thought it was going to be.” But Jacob Rees-Mogg, the Conservative MP for North-East Somerset, points out that tax revenues tend to lag well behind other signs of recovery.
He adds that such revenues can then increase “really surprisingly rapidly”. I do not of course know whether tax revenues will at some point start to cascade in to the Treasury so fast that the deficit begins at last to vanish. But when so many other indicators have already turned in a favourable direction, it seems to me that however fed up we become of hearing about the long-term economic plan, it is far too soon to say that it has failed.