George Osborne gambles on spending cuts despite slip in voter support
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Version 0 of 1. George Osborne took a calculated political gamble by endorsing plans for a reduced state as a Guardian/ICM poll showed Labour opening a five-point lead in the aftermath of the autumn statement. ICM reported that support for Tories dipped three points to 28%, while Labour inched up one to 33%. The Liberal Democrats climbed three from last month to 14%, while Ukip stands still on 14%, for the third month in a row. The Green party is on 5%. Despite evidence from ICM that showed the public believe Osborne is going too far, the chancellor told the Treasury select committee he would achieve his fiscal targets of a large overall surplus by the end of the next parliament without any need for tax rises. “I have set out proposals that don’t require an increase in taxes, including VAT,” he said. Osborne also confirmed he had sent his autumn statement spending plans to the Treasury watchdog, the Office for Budget Responsibility. They end with a forecast £23bn surplus in 2019-20, and the smallest public service spending in relation to national income since the 1930s. However, when asked whether “the chancellor is taking the tough decisions that Britain needed to live within its means”, only 35% of voters agreed, according to the ICM, whereas 55% said that Osborne was “going too far, and imposing cuts that will endanger important public services”. Voters also rejected by an overwhelming majority Tory plans to shrink the deficit by spending cuts alone, rather than a mix of cuts and tax rises. Only 16% back pure expenditure cuts, with no tax rises, as the best solution. A similar 15% would like to see tax rises do one-third of the work in filling the Treasury’s black hole, while 13% would like to see taxes contribute two-thirds. Most would like to see the task of fiscal consolidation split evenly between tax rises and spending cuts. But there was some good news for Osborne when official figures showed that Britain’s workers had been handed some Christmas cheer as data showed real pay is starting to rise again after six years of falling wages. Wages for UK workers increased by 1.6%, excluding bonuses, comparing August to October this year with the same period in 2013, which was higher than the 1.5% rise predicted by the City. In the month of October alone, wages were up 1.8% compared with a year earlier, which was the highest in seven months, according to the Office for National Statistics. It was also higher than October’s 1.3% inflation rate, signalling a rise in real wages. Unemployment data published in the same report showed that the UK jobless rate was unchanged at 6% in the period from August to October, disappointing City expectations of a drop to 5.9%. Ed Miliband and Nick Clegg have both been emphasising the claim that Osborne is involved in an ideological crusade to cut the size of the state to the level of the 1930s. Some Tory ministers, wary about the Labour attack, have edged away from the £23bn surplus projection in 2019-20, saying only that it is a projection the OBR has made, so giving the party the chance to target a smaller surplus, and as a result higher state spending. However, when Osborne was asked to confirm he had submitted plans that would lead to a state that is 35% of GDP, he said: “That is the OBR’s forecast of the consequences of the spending plans I submitted to the OBR and their forecasts of GDP. It is their forecast but it is absolutely the spending proposals I submitted by the OBR.” The chancellor said he only differed from the OBR in that he believed he could reduce departmental cuts by increasing welfare savings and finding £5bn revenues from clamping down on tax evasion. Osborne, who announced that he will deliver his final pre-election budget on 18 March, is confident he can turn the argument round, insisting that public spending cuts in this parliament had not damaged public services. He also insisted his plans proposed a state in which public spending as a proportion of GDP is the same as that delivered by Gordon Brown as chancellor in 1999. He added: “We are delivering public expenditure savings at the same pace as we have achieved in this parliament, a period in which I think the performance of our public services has improved, crime has fallen, satisfaction with local government services has risen amongst the population, the NHS is treating more people, we are getting more people into good schools.” He also tried to paint Ed Balls, the shadow chancellor, into a political corner by saying if he goes ahead with his stated plan to vote next month for the coalition’s charter of budget responsibility, Labour will be signing up for £30bn of extra fiscal consolidation by 2017-18. Osborne told the committee that it would not be good enough for Labour to welcome the words in the charter, it would have to embrace the actions that are required to deliver them. He said: “ If people sign up to the charter that requires £30bn of consolidation, they have a choice. You can either do it through public expenditure reductions including welfare cuts, or you can do it through tax rises”. Osborne was speaking on a day when new ONS figures showed pay outstripping inflation, something he described as “the major moment of this parliament”. The Conservatives hope the combination of rising living standards and good employment news will drive a feel-good factor. |