Fraser Nelson

More to Osborne’s plan than gambling

More to Osborne's plan than gambling
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Paul Mason's review of the cuts for Newsnight last night (from 10:20 into the video here) was one of the most powerful critiques of Osborne from the left. His package majored on Osborne's decision to cut a further £11 billion from welfare and pensions, to soften the departmental cuts. Adopting a rather funereal tone, Mason declared that, "if you are poor, your life is about to change". He produced a decile graph, showing the poorest are hit second hardest. It foreshadowed this morning's Guardian cover: "Axe falls on the poor".

Danny Alexander was fed to Paxo: "You said you would not balance your budget on the backs of the poor - when did you change your mind?" (Alexander performed very well - stunningly, even, given what he was doing only six months ago). Mason finished saying, "The theory is that if you cut the state, the private sector will expand. We're about to find out if that theory is correct." So the narrative is of Osborne the Gambler.

In fact, Osborne's declared road to fiscal sanity has already paid firm dividends in the drop in cost of government borrowing and enough economic confidence to see the creation of some 330,000 jobs this year so far. And the OBR forecasts that the private sector will create three jobs for every one cut in the private sector.

On a panel later Jason Cowley, my counterpart at the Statesman, asked the crucial question: "will we see jobs created in the private sector to match those lost in the public sector?" The answer from Mason's piece, as above, was that we cannot be sure.

True - but we do have forecasts. And the economics firms monitored by the Treasury suggest that new jobs will outnumber layoffs and, ergo, unemployment will fall. Not everyone has the 3-to-1 ratio forecast by the OBR, but almost everyone says the unemployment figure will get better. And that's worth something.

Again, the forecast of 490,000 public sector job losses is not new today. It has been known since it was published by the OBR in June - plenty of time for it to be digested. What is new today is that more pain will be suffered by welfare, and less by government departments. This is unlikely to have a negative impact on employment. But those decile charts will be a problem for Osborne, unless he manages to set his own terms of debate.

P.S. The decile graphs showed the poorest getting poorer under Labour - and no one seemed to care. As far as I'm aware, this was only reported on Coffee House.