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Sunday, 24th August 2008

The hares and tortoises set to do battle once again

Peter Hoskin 9:39am

After the news that the UK economy is most likely already in recession, the hare and tortoise debate of a few months ago looks set to return to Tory politics with a vengeance.  In today's Telegraph, Lord Forsyth and John Redwood say that the Tories need to think about an alternative to "sharing the proceeds of growth", and that that alternative should be based around spending cuts.  Here are the relevant passages:

"Lord Forsyth of Drumlean and John Redwood, who chaired Mr Cameron's policy commissions on the economy, suggested it was no longer adequate for the party to promise to 'share the proceeds of growth' between public services and tax cuts now that the economy is at a standstill. They called for a bold commitment to cut public expenditure and taxation in order to stimulate recovery.

Lord Forsyth, the chairman of the Tory tax commission, said it was the 'end of the road' for big increases in spending and the Tories needed to 'cut our cloth'...

...He told The Sunday Telegraph: 'The problem is that the higher the burden of taxation, the less opportunity there is for growth. If you want to get further growth then the state has got to take less from people in tax. As you reduce the levels of taxation you will get growth'...

...His views were echoed by Mr Redwood, whose economic competitiveness review proposed a £14 billion cut in red tape.

He said: 'Obviously, a Conservative administration will have to undertake a policy of economic recovery. I’m afraid it’s going to get worse before it gets better.

'The situation now is the result of this Government’s overspending, overborrowing and overtaxing.

'There are areas where you could stop spending on unnecessary programmes which will start to relieve pressure. We can cut back on things.'"

You could just dismiss this as the tax-cuts-at-all-costs brigade having their moment in the limelight.  But their arguments have extra traction during the current economic downturn, and I expect a few more Tory voices will soon be clamouring for an alternative to the "sharing the proceeds of growth" formula.

This has the potential to be the biggest question for the Tory leadership ahead of conference season, and one which economic circumstances make it difficult for them to ignore.  How will they answer it?  It would be unwise to rush through a new economic framework over the next couple of weeks, so - for the time being - George Osborne may just have to resort to saying "we're working on a new fiscal framework", as he did in an interview with the Telegraph yesterday.

But that response brings new questions with it.  Why, the Tory faithful might ask, did a fiscal framework predicated on positive growth not have a negative growth back-up plan in the first place?  Why are they waiting until now to think about the possibility of recession?  And Osborne - who's enjoyed skewering Brown's government with his "failed to fix the roof whilst the sun was shining" mantra - may find those a lot more difficult to answer.

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Ian C

August 24th, 2008 11:31am Report this comment

The party Conference was always going to be the time for these sort of changes to be announced and this article should be seen as prsessure to ensure that they happen. Now that the Tories have Broon on the run they can credibly say that in the light of what they have learnt since DC and GO took over, they have discovered alot more about what disasters Labour has wrought on the economy and that an entirely new approach based upon restoring the competitiveness put in place in the post Black Wednesday period needs to be the priority if we are to have an economy able to meet society's needs - health, education, tarnsport, benefits.

That means cutting the crap out of life for people and businesses in the UK and restoring education to the single most important item on the agenda - as Balir said he would do and singularly failed because Brown and the Labour Party stopped him and he was too timid and politically correct anyway.

David

August 24th, 2008 11:36am Report this comment

I'd have more time for this if they hadn't been calling for exactly the same cuts when the economy was growing. What ever the state of the economy, they call for tax cuts.

TGF UKIP

August 24th, 2008 12:55pm Report this comment

This story should have been headlined "Tory conservatives take on Tory soc dems - at last!"

The Melissa Kite article does, however, contain one or two issues of fact. Firstly she states that Dave & Boy George are commited to Labour's spending plans to 2010/11 whereas Fraser Nelson this week asserted again here that expiry date is 09 (I assume he means 09/10) with Melissa also indicating that the Deadly Duo are then commited to further rises at the reduced level of 2%. Melissa also reminds us of the Lansley pledge (never rowed back from) to chuck on top of all this an exta £28bn into the bottomless pit of the NHS, while all the time of course promising to continue to short change the Armed Forces.

However, to help educate this debate a little more Pete could you provide us with the government planned spending figures from 08/09 through to 11/12 together with the number of UK households so we can do the sum to see how much Dave and Boy George plan to cost us all. Fraser seems strangely reluctant to show these figures - ashamed no doubt. (I note, however, that borrowing figures for these years are £679, £721, £778 and £809 bn.)

With regard to the very relevant "why" questions you raise in your final para, Pete, perhaps the answer is that Osborne is the most inadequate and unimpressive figure ever to have held this position for either major party for at least the past fifty years.

Kit

August 24th, 2008 1:23pm Report this comment

"sharing the proceeds of growth"

Replaced by:

"sharing the losses of recession"

The public sector may not like but it sounds fair to me.

The Underdoug

August 24th, 2008 2:36pm Report this comment

Surely

sharing the losses of recession

is

sharing the proceeds of growth

using negative numbers.

Or don't politicians understand negative numbers?

Pete Hoskin

August 24th, 2008 3:17pm Report this comment

TGF UKIP: those figures you wanted...

Total managed expenditure (the usual measure of overall public spending) in real terms (£ billion, 2007-2008 prices):

2008/09: £599.8
2009/10: £610.9
2010/11: £625.1

These were derived using the latest GDP deflators, which are currently only approximate ones for the years 2008-11:

http://www.hm-treasury.gov.uk/economic_data_and_tools/gdp_deflators/data_gdp_fig.cfm

You can find cash terms spending figures for those years in the Public Finances Databank that the Treasury puts out each month (tables B1 and B5 are particularly relevant). Here's the excel file:

http://www.hm-treasury.gov.uk/media/A/9/pfd_210808.xls

Or you can go to this webpage:

http://www.hm-treasury.gov.uk/economic_data_and_tools/finance_spending_statistics/pubsec_finance/psf_statistics.cfm

And there's plenty of other stuff in there besides (borrowing, tax receipts etc.). If you want to know how the Government's breaking down that spending, I'd suggest Table C11 towards the back of the latest Budget (pdf, p197):

http://www.hm-treasury.gov.uk/media/9/9/bud08_completereport.pdf

Or you can go to this webpage:

http://www.hm-treasury.gov.uk/budget/budget_08/report/bud_bud08_repindex.cfm

And as for the number of households, there aren't any year-by-year projections. The latest calculations were made during the 2001 Census, and the forecasts then were 25.29 million households in Great Britain in 2006, and 26.20 million in 2011. So I guess 26 million is about right. You can find those stats here (excel file):

http://www.statistics.gov.uk/STATBASE/Expodata/Spreadsheets/D7678.xls

Or on this webpage:

http://www.statistics.gov.uk/STATBASE/ssdataset.asp?vlnk=7678

Hope that helps!

Incidentally - and I don't want this to sound patronising - but would CoffeeHousers ever appreciate a guide on where to look to get hold of government, and other, statistics? Loads of the most interesting stuff is buried in the depths of labyrinthine websites...

TGF UKIP

August 24th, 2008 4:07pm Report this comment

Thank you very much indeed Pete - very helpful, I'm going to print off your response to keep for my future reference.

A guide would be appreciated though I would confess that spotting "the most interesting stuff buried in the depths of labyrinthine websites" probably requires a more practised eye and familiarity with statistics than I possess and why I, and I suspect many other Coffee Housers, rely on and are so grateful to you, James and Fraser for providing.

Thanks again though for taking so much trouble with the above response.

David Parker

August 24th, 2008 7:59pm Report this comment

Clearly,overall tax cuts,as opposed to tax adjustments in certan specific areas, would be an unrealistic political promise during what may be, possibly, a prolonged period of econmomic recession.

However, it is a fallacy to equate tax cuts with a reduction in public spending, where there is a real possibility of major savings, without any reduction in the quality of public services.

This would, of course, mean a massive reduction in the unecessary surplus of employees in local government, quangoes,
arms length bodies.etc.etc. and therefore a temporary increase in unemployment figures and costs. However, some,perhaps even a majority of these might, after suitable re-training, become employable in the private sector.

Bureaucracy,and consequent internal empire building, have proliferated under the present Government. But, as with other essential points, Cameron has so far refused to address this point.

Marian C

August 25th, 2008 10:06am Report this comment

David Parker - I agree

TC

August 25th, 2008 10:22am Report this comment

Pete -

Yes, a guide on where to find government statistics would be hugely appreciated. I often think that government websites have been designed with the sole purpose of making things difficult to find!

Sterence

August 25th, 2008 5:34pm Report this comment

Thank you for the suggestion of a guide to govt statistics - this would be very useful.

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