“For £39 billion to be raised without any further tax-raising measures, growth in total public spending over this period would need to be reduced by 1.1 percentage points a year, i.e. there would need to be a five-year real freeze in total public spending. Because of rising real spending on debt interest payments, tax credits and social security benefits, this would require real cuts in most other areas of government spending, and even favoured areas such as health and education would undoubtedly see much lower spending growth than they have received in recent years. Alternatively, were the £39 billion to be raised entirely through further tax-raising measures – thereby eliminating the need for any further spending cuts – then taxes would need to be raised by an average of £1,250 per family.”
There is going to have to be some mix of spending cuts and tax rises to pay for this. For obvious reasons, I would lean heavily towards cuts rather than tax increases which could choke off what is sure to be a fragile recovery. There are going to be demands for the Tories to name specific places where they would cut substantial sums, Evan Davis was pressing George Osborne on this very point on the Today Programme this morning. But the danger for the Tories in getting specific is that the debate then becomes one about the precise merits of each cut rather than the urgent need to reduce public spending. When it comes to spending cuts, there is a case for the Tories embracing the Nike agenda: Just do it.