“If Ed Miliband had announced unfunded tax cuts or spending increases of the kind that David Cameron blandished yesterday you would be accusing Labour of gross irresponsibility.”
That was what one person I respect said to me earlier today and I think it deserves an answer. And, frankly, having watched Nicky Morgan coming somewhat unstuck on last night’s Newsnight – trying to answer Evan Davies’ questions about how the tax cuts might be funded – it needs to be answered.
While nearly every other newspaper that supported the Tories at the last election was in swoon mode this morning, the Financial Times stood out from the crowd in worrying about the £7 billion widening of the fiscal gap caused by Cameron’s offer of unfunded tax cuts – something that Dom Cummings has noted he has previously eschewed. In a leader entitled “David Cameron trades votes for economic credibility” the newspaper concluded that David Cameron had “staked out a fiscal position that is neither sober nor realistic”. The Prime Minister will be regretting calling the FT “dry and dusty” on Monday’s Newsnight. The pink ‘un got its revenge this morning.
So, what’s my answer to my friend’s charge of hypocrisy?
The core of the answer is that I trust David Cameron to fill the fiscal gap a lot more than I trust Ed Miliband. This, after all, is a Prime Minister who has enacted deeper spending cuts than Margaret Thatcher ever managed. Some of the decisions he, George Osborne and, let’s be fair, Nick Clegg have overseen have been incredibly tough. Big cuts in defence, policing and justice budgets are of historic size. There has been a sustained, albeit insufficient, squeeze on public sector pay. Reforms of university finance, housing benefit and the retirement age, in particular, will save tens of billions in the next decade. The overall tax burden has actually risen by nearly £25 billion. The hike in VAT was particularly painful. Nearly all of these decisions have been opposed by Labour – which is why they are at the bottom of the hill climb towards any fiscal credibility. Polls suggest that’s not just my opinion but, more importantly, the public’s opinion, too.
It’s also sadly true, one must concede, that the Tory leader is only just over a third of the way towards the summit of the credibility hill. The deficit was supposed to be eliminated in this parliament. 60 per cent will still be there by next May and the national debt itself will still be rising skywards. This year’s deficit may even be larger than last year’s – partly because income tax receipts are weaker than forecast (because so many of the new jobs being created are low paid). The Chancellor has been brave enough to say £25 billion of more spending cuts will be needed but has only identified where £3 billion of them will fall. Sadly, from a one nation Tory perspective, those cuts are falling on the low-waged. Where, if “we’re all in this together”, are the sacrifices from those richer pensioners who don’t need the winter fuel allowance or those people in large properties who pay the same council tax band as someone in much, much smaller households?
The Prime Minister has made Conservative promises that he has refused to make before. He’s done so because of the threat of UKIP (an argument I set out in today’s Times). They are risky promises. Risky because they do endanger the Tory reputation for fiscal seriousness. Dangerous because as Paul Goodman has already argued they don’t much help the Tories’ “party of the rich” problem. The five million lowest paid workers don’t pay any income tax. But while these are risky promises they come from someone who has spent the last four years trying to extinguish the fiscal fire rather than someone who helped start it in the first place. Under Labour Britain ended up with a bigger deficit than other countries struck by the global recession. This happened because Labour lost control of spending during the boom years. You don’t trust an arsonist with matches. The Tory press (and I) do trust Fireman Dave. Just about, anyhow.
PS My prediction by the way is that if the Tories do win the next election they’ll deliver the tax cuts but they may not eliminate the deficit (it’ll all depend upon economic growth performance which is likely to moderate as monetary policy tightens). George Osborne hasn’t paid much of a political price for missing borrowing targets and he or whoever is Chancellor will put delivering these tax cuts ahead of getting rid of the deficit.