You haven’t seen anything yet

George Osborne gains marks for being the first front bench politician of either of the two main parties prepared to spell out the details on the cuts which will have to be made to balance the budget in the longer term.  Brave certainly, but not brave enough.

 The Government is spending way beyond the revenue it raises.  It calculates that when the economy has returned to growth a £90bn deficit will remain despite the increases in revenue that growing economic activity will bring. 

The question for British politics is how to eliminate this deficit before the country succumbs to the next recession.  

Putting the question like this shows how modest George Osborne’s contribution is.  By far and away the biggest cut is a single year freeze in most public sector pay – £12bn.  

But this is a one off saving.  There won’t be a £12bn saving the following year unless the freeze is continued.  

What is required are permanent cuts in expenditure if the deficit is to remain reduced, and on a course to elimination. 

Ita is misleading to report the Osborne package as a £22.5bn savings over a parliament.  For once we need to keep focussed on the early cuts total.  How do the cuts shape up to a permanent £90bn reduction? 

Apart from a year’s public sector pay freeze, a further £12bn from cuts was announced.  £1bn of that comes from savings on incapacity benefit which have proved in the past notoriously difficult to achieve.  Even more questionable is the £7bn savings from cuts in the Whitehall bureaucracy.  This Government has been trying to cut the bureaucracy and yet the cost of government continues to rise. 

The only clearly deliverable and sustainable cuts in the whole package amounts to £3.5bn: £1.5bn scrapping of child trust funds for families earning over £16k a year and the £2bn savings in cutting back on the eligibility to tax credits.  The cap on top civil servants’ pensions is estimated at a £1bn saving but is calculated over a decade. 

Full credit to George Osborne for starting the debate on the theme ‘we are all in this together’, but these spelled out savings are tiny in comparison with what is required. 

The next big cuts speech better take the theme: you haven’t seen anything yet. 

Date added: Wednesday 7th October 2009