Peter Hoskin

The Treasury is playing a very smart game

The Treasury is playing a very smart game
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Picking up David Laws' axe at the Treasury was never going to be easy – but all credit to Danny Alexander, who seems to be managing it with some degree of gusto.  After those extra savings he announced a few weeks ago, the Chief Sec has now written to ministers asking them to identify cuts of up to 40 percent in their budgets.  I repeat: 40 percent.  That's higher than the highest roundabout figure I heard before the election (30 percent, from civil servants as it happens).  And it tops the 33 percent that the IFS suggested might be necessary last week.  Quite a few ministers will be quaking at the very thought of it.

In truth, though, the 40 percent figure is "worst case scenario" territory.  The various departments are also being asked to prepare for a "best case scenario" of 25 percent, while education and defence face lower cuts of between 10 and 20 percent, and health and international development are being spared the axe completely.  So, chances are, that 40 percent figure will never be reached.

Despite the inevitable wails and catcalls from the red corner, this is smart politics by the Treasury team.  As the Brown years amply demonstrated, there's a tendency to overestimate just how much money can be recouped from making "efficiency savings" and cutting "administrative costs" – so that what ministers call "25 percent cuts" might easily turn out to be 20 percent cuts, or less, in reality.  This time, though, the Treasury will have a safeguard against any misplaced optimism: an entire menu of other cuts they can deploy should circumstances require it.  Always best to keep 'em on their toes, as they say.