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Conservative first year cuts to be 1% of public spending

Last Updated: Tuesday, August 10th, 2010

Dear subscriber,

Here is our latest Intelligence Letter. Apologies for not getting one to you last Friday but I was on the campaign trail with David Cameron. You can read about my day via
I’ll write another Letter late tomorrow or early Wednesday reviewing the Tory manifesto, which is officially launched tomorrow.

Conservative first year cuts to be 1% of public spending

George Osborne believes that if a policy can’t be sold it will never be implemented. His apparently casual affirmation during a recent Guardian interview that a Conservative Government will cut £6.5 billion from public spending provided further evidence of this bias.

6.5% is a mere 1% of public spending – not nearly enough to bring Britain’s rampant debt under control. But Osborne would make two main responses to such criticism.

First, he’d issue a gentle reminder. His approach has always been to make the bulk of spending cuts in years two and three, when the economy is expecting to be recovering and to take the strain.

Second, he’d return to the politics of the announcement. Labour, and particularly his main opponents Brown and Mandelson, are warning that Tory cuts will tip Britain back into recession. This attack was always dubious economics, to say the least. But Osborne’s statement has closed down Labour’s attack: after all, cutting a mere 1% of public spending couldn’t possibly devastate the economy.

The critics – and others – will still ask whether the Conservatives have the necessary bottle to make as yet unspecified cuts during second and third years – rather than at the very beginning of a parliament and furthest from a re-election bid. If they win, we shall see.

Cameron cancer commitment

David Cameron’s commitment to keep NHS spending rising in real terms gives him room to make attractive health election pledges – and so it recently proved.

Over the Easter weekend, Andrew Lansley announced that raising the threshold for Employers National Insurance contributions will free £200 million for the NHS budget each year.

Lansley said that the money would be used to ensure that no cancer patient is refused access to drugs that have been licensed since 2005 if their doctors say they need them.

Many anti-cancer drugs have been certified as safe, but the National Institute for Clinical Excellence (NICE) has nonetheless refused to make them available on the NHS due to cost.

So the money from the Cancer Drugs Fund will be added to the NHS tariff in order to pay for the extra cost of those drugs, meaning that doctors will be able to prescribe them without needing to apply to their Primary Care Trust for funding.

Furthermore, the Conservatives are pledging that by 2014 a Tory Government will have reformed the way drug companies are paid for NHS medicines by moving to a value-based pricing system – so that effective treatments are made available through the NHS, with drug providers paid according to the value of their new treatments.

This would be a shift away from the existing system of price control and profit cap through the Pharmaceutical Price Regulation Scheme, which the Office of Fair Trading has concluded is not providing good value for patients.

Two other eye-catching NHS commitments are a guarantee to see a doctor in their area for 12 hours a day, seven days a week and reforms to dentistry that should ensure one million more people have access to an NHS provider.

Tory Equitable Life pledge

The Conservatives turned up the heat on the Government last week by pledging more support for the victims of the Equitable Life scandal.

The party has always been sympathetic to their plight – but sympathy butters no parsnips for furious policy holders.

So with adept election timing, Mark Hoban, the Conservative Shadow Financial Secretary, last week announced that policyholders, and families of the 30,000 who’ve died uncompensated, will get quick payments worth up to £1 billion.

Hoban said: ‘If more than 30,000 people had died waiting for justice in any other situation there would be rioting on the streets.

‘Yet Gordon Brown’s government has been happy to kick the issue of Equitable Life into the long grass.

‘Today we make a firm pledge to compensate policyholders and dependants, with no means-testing. They have waited long enough for justice.’

The Conservatives say that the amount paid out will be determined by an independent assessor but expect compensation to run into hundreds of millions of pounds.

They insist the pledge to act to end the injustice for policy holders does not involve any new spending commitments since the cash will have to be paid out by whoever is in government over many years.

Hoban will have no complaints about the handling of the announcement, since Osborne left it to him rather than bag it himself. Not all Shadow Cabinet members are prepared to put good relations with their team above grabbing a headline.


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