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When the Coalition took office in 2010, spending control was its main mission.  The Conservative Manifesto had pledged “a credible plan to eliminate the bulk of the structural deficit over a Parliament”.  The Coalition Agreement promised to “significantly accelerate the reduction of the structural deficit over the course of a Parliament”.

George Osborne made good progress on reducing the deficit, cutting it by half as a proportion of GDP by 2015.  But although views of how much of it was structural will vary, it can’t seriously be held that he met that first aim, and he arguably didn’t achieve the second one either.  Historians will note that halving the deficit was Alistair Darling’s aim in 2010 – not his successor’s.

By the time he left office, the former Chancellor was seeking to achieve a small surplus by 2020.  It was doubtful that he would gain one.  Now that he is gone, there are three main obstacles to achieving a balanced budget any time soon.

First, Brexit.  In the short-term, the economy has defied the gloomstering of the Project Fearsters.  But the medium-term – that’s to say, the period covering the exit negotiation and its immediate aftermath – is unknown.  The longer-term requires a reorientation of the economy towards more exporting to countries outside the EU.  In these circumstances, Phillip Hammond needs maximum flexibility in order to achieve his new target of balancing the budget “as early as possible in the next Parliament”.

The second problem runs deeper.  Like other western countries, Britain has a growing older retired population.  Younger working people must thus foot a big slice of the growing bill for the former’s state pensions and healthcare.  But the NHS budget is ring-fenced and the state pension triple-locked.  The aid and defence budgets are also protected.  The decisions to do so reflect manifesto commitments, and thus couldn’t easily be reversed.

The third problem is perhaps more serious still.  It isn’t the question of whether voters are willing to back reform soon to avoid it being forced on them later – probably more hastily and thus more damagingly.  It is, rather, whether Conservative MPs still have the appetite for deficit reduction that they had in 2010 (and even that was limited).  David Cameron was beaten in the Commons on tax credits, personal independence payments, and other proposals for reductions in the rate of spending.  Theresa May is seeking to avoid legislation where possible.

This site’s leitmotif is that Brexit changes everything.  For this reason, we believe that Hammond’s postponement of the date for balancing the budget is necessary.  But he may well not hit it.  (The Institute for Fiscal Studies believes that he won’t.)

But Theresa May and Hammond especially – given the consuming task of Brexit negotiation on which the Prime Minister must lead – must start thinking now about 2020.  If Jeremy Corbyn is still Labour’s leader, there will never be a better election in which to propose reform.

That’s why ConservativeHome is running, over the next three days, a mini-series on longer-term ideas for getting the budget back into balance and making public spending more sustainable.  It opens today with an article on the site by one of the party’s brightest thinkers and most neglected talents, Dominic Raab.

Achieving a fairer balance of spending between the generations (thereby furthering social justice) will obviously be easier if it’s backed by as much political consensus as possible.  Which is why it needs an Affordability Commission – not to decide policy, but to make recommendations.

142 comments for: Conservative MPs are not up for the challenge of reducing public spending growth

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