It is plain that the public purse needs a swift injection of cash. The question is where it will come from. Daniel Finkelstein’s column in this morning’s Times argues that the proposed Tory cuts and public service reform will save money in the long-term, but not immediately. He cites Peter Lilley’s 1995 pension reforms – the benefits of which the spendthrift Brown government is about to enjoy:
Lilley’s pension reform will save £400million next year and is estimated to save nearly £10 billion a year by the end of the next decade. However, it has taken 15 years to take effect; Cameron’s ‘post-bureaucratic age’ reforms are essential for re-balancing the nation’s books, but he cannot wait that long. As Finkelstein, who is close to Osborne, notes, tax must rise. The rhetoric emanating from the front bench suggests the Tories realise they have no other option in the short-term – George Osborne and Philip Hammond have admitted as much since this crisis began.‘The Tories decided to equalise the state pension age at 65. This meant raising the female pension age from 60. But such a policy threatened to be very unpopular, disappointing the legitimate expectations of women approaching the existing retirement age. Lilley ensured that no woman born before April 1950 would be affected by it. The change from 60 to 65 would be phased in, starting in 2010 and being completed only in 2020.’
The Tory’s political problem is that having argued that money can be saved by cutting waste they have created the impression that cuts can be made without damaging services. Much rests on whether the future chancellor can raise enough money to deliver effective public services before the reforms start to yield the taxpayer savings.
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