Lionel Zetter is an author and freelance public affairs consultant who is also a director of ComRes and of the Enterprise Forum. His most recent book is Blueprint: The Politics, Principles and Personalities of the New Conservative Government, which was published in October.
I have long argued that when Tony Blair finally resigned he shipped Gordon Brown a blatant hospital pass*. The New Labour brand was badly tarnished by the Iraq War, the party’s poll rating was slipping, and the economic storm clouds were gathering.
Having said all that, if Blair to Brown was a horrendous hospital pass, Brown to Cameron could turn out to be the ultimate hospital pass. In 1997 Labour inherited a strong economy, with growth stretching back to the UK’s ejection from the Exchange Rate Mechanism in September 1992. The legacy which David Cameron and George Osborne will inherit in 2010 could not be more different, and in many ways could not be any worse.
Just in raw statistical terms the numbers are terrifying. In his April 2009 Budget, Chancellor Alistair Darling estimated that government borrowing this year would reach £175 billion. For those who cannot get their heads around figures of that magnitude, that means that the Government is currently borrowing £6,000 a second. In July 2009 the Office of National Statistics announced that the National Debt stood at £799 billion, and it is edging ever closer to the £1 trillion mark.
On top of this unfunded public pension liabilities are already in excess of £1 trillion, and there is off balance sheet borrowing of over £200 billion under the Private Finance Initiative. Finally, there are the huge liabilities which the Government was forced to take on in order to prevent a collapse of the banking system last year. All in all it is not surprising that the Institute for Fiscal Studies estimates that we will still be paying off this debt in 2032.
Some of the current Government’s recent problems illustrate to some degree the problems the Tories will face if elected next year. When Mr Brown and Mr Darling try to save a few tens of millions of pounds by cutting the TA training budget or restricting the tax relief on Childcare Vouchers, they are howled down and forced to retreat. Because of the nervousness of their own backbenchers, and because there is a general election around the corner, the Pre-Budget Report next week is unlikely to contain any significant proposals for spending cuts or tax rises.
Far from looking to save a few tens or even hundreds of millions, the next Tory government will have to be looking for savings of at least 10% across the board. Since the NHS and International Development are specifically insulated against any cuts, that figure could be closer to 20%. That is a colossal task, almost without precedent. Only one Western government has ever achieved spending cuts of that magnitude – the Canadians in the mid-1990s.
Under the "Canadian model", ministers and senior civil servants were instructed that they would have to achieve 20% cuts in their departmental budgets. However, they were not told how they were to achieve the savings – that was left to their discretion. What they were told was that having devised the savings strategy they would then have to implement it – there would be no reshuffles to save ministers’ blushes and enable them to shirk their responsibilities. The Conservatives have apparently been studying this model closely, and speaking to some of those who were involved in the exercise.
The Tories are going to have to be very clever, very decisive, very tough – and possibly very lucky as well. They need to introduce the necessary cuts in their first Budget, which has been promised within the first 50 days. If they get it right, then they could eliminate the deficit and get the economy back on track within three or four years. This would virtually guarantee them a second term – and quite possibly a third as well.
However, if they fail to achieve the desired results, they could be in big trouble. Many pollsters and pundits are claiming that the electorate does not feel any warmth towards the Tories – despite David Cameron’s individual popularity. That is not a huge surprise. The role of the Tories is to be respected, not loved. They are supposed to be better at running the economy than the Labour Party, and when they get that wrong (as they did in 1992), they are severely punished (as they were in 1997).
In theory, the fall-out from the credit crunch should hand the Tories a big win in 2010, and at least one further term after that. If, however, they get the restructuring of government and the economy wrong, they might not get a second chance. That is the problem with hospital passes: you may be able see them coming, but that does not mean you can avoid them.
* For those non-rugby fans who are not familiar with the term a hospital pass is where a player, faced with a charging mass of opponents, unloads the ball to a team-mate who then has to take the hit.