George Osborne was in bed when he heard Andrew Lansley on breakfast radio last week discussing health spending. It was an unremarkable story about Labour’s budgets, with no hint of the political bombshell about to drop. The shadow health secretary was saying that the Tories would increase health spending — which is, of course, official party policy. But to pay for it, Mr Lansley announced matter-of-factly that all other departments under a Tory government would have to suffer a budget cut of about 10 per cent.
Suffice to say that Mr Osborne did not get much more sleep after that. Mr Lansley had not quoted an official party figure, but used a calculation first carried out by The Spectator to show what would happen if David Cameron were so unwise as to leave the bloated NHS budget intact. The Institute for Fiscal Studies had worked out that Alistair Darling’s Budget involves 7 per cent cuts over the three years to April 2014. Any party wishing to ring-fence health expenditure would have to visit 10 per cent cuts on other departments. Predictably, however, Gordon Brown decided to misrepresent this simple statement of fact as the exposé of a secret Tory plan.
For a decade or so, the Conservatives have had a clear drill when accused of planning spending cuts: run, hide and retract. Oliver Letwin went missing for days during the 2001 election campaign when Gordon Brown accused him of plotting to cut £20 billion from public spending. Howard Flight lost both his job and his seat for suggesting that Michael Howard would be more parsimonious in government than he was proposing in opposition. But this time Mr Osborne has said, clearly and simply, that he will indeed make cuts. So, for that matter, would Labour. But the Tories are at least being honest about it.
Even now, the Prime Minister is not quite sure how to deal with all this. He has instructed his reluctant ministers to tour television studios denouncing Mr Cameron as ‘Mr 10 per cent’ — only to find sceptical interviewers refusing to believe his claim that Labour would not make its own cuts. What the PM fails to grasp is that the media environment in which he is operating has changed fundamentally. The Big Brown Lie about spending has been instantly exposed for what it is by a new breed of bloggers who have limitless space on the web to expose his statistical scams — known as Brownies on CoffeeHouse, this magazine’s own Westminster team blog. And this process of scrutiny happens more or less instantly, in real time.
Perhaps more importantly, Mr Osborne’s argument that cuts are necessary is being treated as a grim but inevitable truth, rather than a doctrinal claim. Such is the sheer pace of change in Britain: the staggering deterioration in the public finances, to depths that would once have been unthinkable, is now hard-wired into our collective political consciousness. The government now has to borrow £1 for every £4 it spends. Even more worrying, most of these IOU notes are bought by money freshly printed by the Bank of England. State spending is the last bubble in Britain — and it has not yet burst.
The Conservatives have grasped all this with growing horror. The writer Irving Kristol famously defined a neoconservative as a liberal who had been mugged by reality. The same definition fits Tory fiscal policy. It started out liberal, seeking to assure the public that there would be no spending cuts under Prime Minister Cameron — rather, a Tory government would ‘share the proceeds of growth’ between expenditure and tax cuts. During the 2006 Tory conference in Bournemouth, a party official was assigned to follow John Redwood around in case he proposed cuts in fringe meetings.
But what was heresy in 2006 has become orthodoxy in 2009. Mr Osborne would argue that the context, rather than his analysis, is what has changed: he remains committed to balancing the budget, which can now only be achieved with spending cuts. In addition, there has been a significant shift in public mood, with most polls showing a clear majority in favour of cuts (a development that Mr Brown’s war machine seems unable to absorb). So the Tory party will now start to pledge cuts openly and repeatedly, hoping to turn the debate into a contest between Tory honesty and Brownite deception.
The next stage, of course, is to say what the Tories would cut. Labour has already provided what they claim is the answer (44,300 teachers, etc). The Tories’ current list — axing identity cards and the pay of quango chiefs — comes nowhere close to the sacrifices that will be needed. The prize is for the Tories to do something they have failed to do since Black Wednesday — to set the terms of the economic debate. Their objective is to link the idea of cuts with the things that voters like the least: government waste, bureaucracy and a welfare state that entrenches very expensive and socially disastrous poverty.
There will be much more to come. The irony is that the ‘10 per cent’ figure which Mr Brown pretends to find so outrageous underestimates what will actually be necessary. If Mr Osborne is to be taken remotely seriously when he says he wants to cut debt, then he will need to impose cuts far deeper than those presently set out by the Treasury.
This is where the shadow chancellor proposes to bring in his Office for Budget Responsibility. It would be an advisory group with a respected external chair — such as Sir Alan Budd, who is already advising the Tories on its design. It would set a timetable for the national debt to be reduced. Then Philip Hammond, in his expected de facto role as deputy chancellor, would negotiate budget cuts with his fellow Cabinet members.
The aim would be to conduct such negotiations in as collegiate a way as possible. Those who objected to Mr Hammond’s proposals would be sent to a ‘star chamber’ to have their claims adjudicated by other Cabinet members. Chancellor Osborne will argue that he is cutting not because he wants to, but because the OBR says he has to — and that Britain may go bust if he does not. In this way, the cuts agenda will dominate the first term.
These are still rough plans, by necessity. There is no point in fixing too much detail while the public finances are changing so quickly. But the principles are being set. Mr Osborne has been struck by the Economist’s headline after the first Thatcher budget: ‘This is what you voted for’. He would like a similar verdict on his first budget. But that means making the case for cuts now and trying to wrestle the economic agenda away from Mr Brown, who has dominated it for so long, with such calamitous results.
In this way, the tactical error of Mr Lansley may yet yield a strategic victory. It has led Mr Osborne to declare that the Tories have been ‘tiptoeing around one of those discredited Gordon Brown dividing lines for too long’. This is true, in all too many regards. Fear of what Gordon Brown might say is a phobia that has stymied Tory thinking for more than a decade. But now, at long last, the party may finally be shaking free of it.