Sean Worth is a visiting fellow at Policy Exchange and a former special
adviser to the Prime Minister. Follow Sean on Twitter.

This is the second article in
ConservativeHome’s week-long series on the Spending Review, which began
yesterday with one
by Peter Hoskin
on the Government’s inability to count. It is intended to
be a “blue” account of what should be in Review. In the spirit of Coalition,
the think-tank CentreForum will present a “yellow account later this week.

Cutting it

Spending reviews
mid-way through an election cycle should be about communicating responsibility
and steady progress, as the space for more radical thinking lies ahead in the
coming election campaign. This one, however, is politically more important and
there are seriously thorny and controversial issues that need grasping.

The first reason
is that the Spending Review is earlier in the Parliament than originally
planned and only covers a year into the next one. This allows the Coalition
parties the space to progressively build the separate platforms they’ll need
for the 2015 election, including campaigning
against each other over differences like welfare and defence spending, if
either were to form a new government (or different coalition). Expect a lot of
fun and games on that front in future.

The second reason
is to do with the Opposition. The Coalition parties remain united on the
central mission of deficit reduction – a consistent front which has helped the
Government poll clear of Labour on economic competence. Polls even show Labour
to be blamed more for the current cuts than the parties actually implementing
them. In the absence of any serious spending pans from them, this is a bruise the Government will want to keep on punching and the
Spending Review is the ideal platform.

In terms of the actual spending package to be
revealed this month, the most important influencing factor has been the
economic forecasting that came with the recent Budget. It showed low growth to
the next election, and that the tax receipts needed to move us from reducing
our annual deficit to tackling our accumulated national debt aren’t coming in
nearly fast enough. George Osborne will want to show he’s pulling out all the
stops to turn this around. That means further focus on shifting what money we
do spend onto productive areas of the economy, such as infrastructure and
keeping business tax low, and away from unproductive areas such as welfare and

There is clearly appetite to go further on welfare.
It has a huge budget and the public approval ratings for cuts are I think the
largest I’ve seen for any government policy. The system was in chaos, but the
low-hanging fruit has now gone and there needs to be fresh thinking about
further reform. Policy Exchange will soon be publishing proposals for paying
charities and social enterprises for doing more with the hardest-to-help people
who lie furthest away from work. 

Further welfare cuts will be more controversial,
but the glaring anomaly has been the billions in benefit perks still going to
rich pensioners who neither want nor need them. Since I left Government last
year, I’ve been saying that this situation looks deeply unfair, particularly in
the face of large cuts to the working age welfare budget, and is an open goal
for Labour. Labour have indeed now said they’d axe them, leaving the Tories the
only party preserving them. Labour would, however, only cut winter fuel
welfare, leaving a raft of perks untouched; the bus passes, eye tests and other
bungs.  This is about fairness and the Tories should respond or their
popular position on welfare reform will be compromised.

Another thorny issue will be the ring-fenced
budgets. While it is right to protect areas like health and education, some
could be asked to do more with their protected envelopes. Health is by far the
biggest of these budgets and supporting elderly care, which is closely
interlinked with the NHS, but under huge pressure because it’s funded mainly
from council tax, is an obvious example. As is populist action like boosting
health-related support for troops returning from conflict zones. Higher rates
of welfare problems, driven by poor mental health, now plague our service
veterans and are a national badge of shame.

The big issue for the Chancellor elsewhere will be
justifying his message of further cuts and that is where he needs to show the
Government will embrace real public sector reform. On the back of my own
research into this, I cannot see our public sector lasting out the decade as
currently configured, because while we reduce spending on services, demand for
them only rises due to population growth and ageing. Without opening services
to the best possible new providers, they will simply collapse.

The public are overwhelmingly supportive of
bringing more choice, openness and new providers into our public sector –
especially poorer people who suffer most from failing monopolies. We must let
them be genuine consumers of services like health and schools, with the right
to compare, choose and switch them from a completely open field of providers.
And our public sector staff should be rewarded according to achievement, rather
than having to accept uniform, automatic-progression payscales.

This is another area where the Tories must own the
territory or progressives in the Labour Party – if they can keep the unions on
a leash and go for it – will steal the centre ground. Other areas of importance
here are tackling the planning bureaucracy and NIMBY-ism that kills growth at
birth, as well as building more family housing by selling off grossly expensive
council properties in posh areas – issues on which Policy Exchange has led

A more political job of the Spending Review
for the Tories is to help tackle recent frustrations over their overall
narrative and focus on issues that regular families care
about. This is an issue of communication, rather than policy, however, and
Tories should actually be able to be very populist. Addressing ordinary
people’s concerns about immigration and welfare with the most radical cuts
ever, for example. Lowering business taxes and taking poorer workers out of tax
altogether. Freezing council tax and fuel duty to help families with the cost
of living. Taking on the teaching unions to provide a better education for
poorer kids. The list goes on.

The Chancellor doesn’t usually disappoint on the
politics around his job, and Tories will hope he has one eye on 2015 for this
Spending Review, using it to communicate the clear, confident and distinctly
Conservative platform the Party needs to be telling people about from here to
the election.