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The Cuts Do Bite After All

Last Updated: Friday, May 18th, 2012

Margaret Thatcher managed real term cuts in only one year. George Osborne et all are planning real term cuts for five or six successive years. To make such deficit reduction swallow-able the Coalition needed economic growth. Without growth the kind of cuts envisaged by the Coalition become impossible to bear and we might soon be getting to that point.

The Right-wingers who say that the cuts aren’t going fast enough are right that it might have been more politically sensible if they’d been frontloaded (and tax rises avoided) but they are wrong to think they aren’t, nonetheless, big enough to hurt. The headline figures that only point to a modest drop in overall spending hide a lot of detail and a lot of pain. Higher than expected unemployment costs plus interest repayments plus the protected NHS, schools, aid and pensioner budgets mean that the cuts that are taking place are falling very heavily indeed in some areas.

Even where cuts are supposedly popular – or eliminate waste – they can be tricky. One man’s waste is, after all, still another’s man’s income. Take the welfare budget, for example. Opinion polls suggest that cuts to (other people’s) benefits are very popular but will that still be the case when the newspapers and TV broadcasts are full of hard luck stories? Iain Duncan Smith expects to lose much of the popularity that he currently enjoys over the next year as the cuts bite on the frontline. The Remploy story is a case in point. Few, notably leading disability charities, believed that Remploy represented best use of government money but that didn’t stop the Sunday Express (not known for its bleeding heart tendencies) from splashing for two successive Sundays against the cuts. The newspaper described Mr Duncan Smith as “heartless”, “shameless”, “unapologetic” and as the “failed former Tory leader”. 80% of welfare cuts are still to be made and IDS is anxious that Tory MPs don’t become too blasé about the challenges ahead. There are reports that the Chancellor wants £10 billion more cut from the welfare budget. The now outgone guru to the PM, Steve Hilton, reportedly wanted £25 billion of cuts. Such cuts will not, I predict, be acceptable to IDS. His advisers think work-related benefits have been cut enough and further trimming should come from pensioner-related benefits like the Winter Fuel Allowance and other benefits received by better-off retirees. Numbers 10 and 11 are unlikely to agree to this, however. The Chancellor is also the Tories’ chief election strategist and he doesn’t want to go into the next election with Cameron having u-turned on promises he made to pensioners in the TV debates. The granny tax row proved the potency of the grey vote. There must be some possibility that pensioner benefits will be on the table after the next election but very little chance before.

Away from Work & Pensions three of the most effective cutters are Philip Hammond, Ken Clarke and Francis Maude.

Clarke and Maude are particularly interesting. Neither are particularly popular with traditional Tories but they have been particularly adept at bringing budgets under control. Both are dry-as-dust fiscal conservatives and Clarke (in controlling legal aid costs and prison numbers) and Maude (in slimming Whitehall (public sector pensions progress is more mixed)) are simultaneously Treasury favourites and villains in the eyes of the civil service.

Neither Clarke nor Maude are set for promotion but Philip Hammond may, in a future reshuffle, be heading for bigger things. He’s likely to be at Defence for some time yet but he’s emerging as a favourite of Tory MPs because of the way he has brought financial discipline to the MoD. His interventions last weekend – publicly worrying about gay marriage and Lords reform – have also raised eyebrows. They weren’t thought to be licensed and may be a sign that he has designs on a bigger role in the future.

If the beleaguered George Osborne was to cease being Chancellor – not something I would predict any time soon – Mr Hammond would be a hot favourite to move into Number 11.

By Tim Montgomerie



OWEN PATERSON EMERGES AS GROWTH HAWK IN CABINET: “Two weeks ago the Northern Ireland Secretary Owen Paterson set out a three point action plan for economic growth during a Cabinet meeting. He called for… Exemption of all micro businesses from red tape, following the model Ronald Reagan pursued in the early 1980s; Ending of all energy subsidies and then fast-tracked exploitation of shale gas; Urgent review of airport policy to ensure Britain gets its full share of global trade.” More via 

THE LIFE OF AN AVERAGE TORY MP, CALLED J. ALFRED PROFROCK: “Prufrock has had three five-minute conversations with David Cameron, once while being photographed with him before the last election, once as part of a larger group at the Ruritanian Embassy, and once at a Downing Street reception for the 2010 intake, where he got the faint but ineradicable impression that the Prime Minister was confusing him with Jesse Norman.” More via

ERIC PICKLES, DEREGULATOR: “The Communities and Local Government Secretary, Eric Pickles, has pledged that his department will exceed the Government’s requirement on red tape, the “one-in, one-out” rule. This is in the Coalition Agreement and is the arrangement “whereby no new regulation is brought in without other regulations being cut by a greater amount.” Eric Pickles has told the Municipal Journal: “As a government, we need to go further in slashing red tape. For every regulation my department creates, it will axe two. I think it’s a practice we should look at adopting across Whitehall.”” More via

MARK FIELD ON BANKERS AND HOMEOWNERS: “As we have sought to understand the roots of the financial crisis, focus has rested upon the role of bankers – their manipulation of and disregard for risk, their short-termism, their failure to respond to public anger and their apparent hostility to change – as well as the apparent willingness of politicians of all parties to give them free rein. But there is another powerful group that has vigorously defended its vested interest in maintaining the status quo – highly leveraged homeowners. Just as bankers were broadly protected by the bailouts from the consequences of the risks they had taken, so too did policymakers move quickly to protect deeply indebted homeowners with even lower interest rates and mortgage protection plans once the financial crisis hit. The mortgage market had become ‘too big to fail’.” More via


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