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George Osborne is not relishing this in the slightest. He has two shields. One is his proposed Office for Budget Responsibility, a quango whose purpose would in effect be to instruct the government to spend less and to help the Chancellor make his arguments. The next shield is of the human variety: Osborne’s plan is to put Philip Hammond in charge of all cuts, tasked to set budgets and take the media bullets. In return for becoming Minister to be Hated, Mr Hammond will be given more power, in effect assuming the role of deputy Chancellor.
It says much about the self-discipline of the Conservative front bench that so little of the internal wrangling over the cuts ahead has come out in the open. There were hints of it at the spring conference in Cheltenham, where Mr Cameron suggested he would sack any minister who could not identify savings — at which point Mr Hammond broke into applause and the rest looked on rather resentfully. For it is already clear that the pain will not be shared equally, and that most of the suffering will be felt by a handful of Tory ministers.
It is said of Mr Hammond that he can never bring himself to end a meeting, so he may be able simply to bore his victims into submission. But he seems to have his favourites. For reasons that no one can quite understand, overseas aid has not only been granted immunity but is expected to have its budget expanded dramatically. Some of this will be done by recategorising the reconstruction element of defence spending. But overall, the Cameron government would find itself in the unusual position of having to borrow money in order to send it abroad as a donation.
Most significantly, Andrew Lansley has been assured that health spending will not be cut. This decision is baffling. Even now, in the dying phase of a Labour government, the NHS is regarded in the Treasury as a black hole, where taxpayers’ money goes to die. Spending has almost trebled while the quality of the service (to put it politely) has not. So the promise to Mr Lansley sends confusing messages out to the rest of the shadow cabinet, who have been told that they are to be the Tory government’s representative in their respective departments and not vice versa. Yet Mr Lansley has gone native before even getting into office, and is already privately referring to the NHS as ‘my department’.
As health is easily the largest government department, with the largest staff of any European organisation, its exemption from the cuts makes the maths brutally clear. There must be cuts of 10 per cent across all other government departments over three years — with the axe falling mainly in education, defence and the Home Office. This means Michael Gove, Liam Fox and Chris Grayling stand to be the financial losers. Each of them will enter office having to deliver, on average, 3.2 per cent real-term cuts for each of the three years covered by next year’s spending review.
Mr Grayling was asking for trouble. He is seen as the most hardworking and versatile member of the shadow cabinet — ergo, the most capable of handling cuts. Were he shadow health secretary, rather than Mr Lansley, the NHS might well be facing a much-needed period of rationalisation and value-for-money reform. As it stands it will be England’s police forces that will probably find themselves with recruitment freezes, forced to pool more resources and find ways of using cheaper civilians to carry out tasks that waste officers’ time. Doing this without provoking head-on confrontation with the unions will be his mission and his challenge.
Mr Gove faces an easier task. He will inherit a school spending budget which since 1997 has doubled to some £6,600 per pupil per annum, while the results have demonstrably worsened. His plans for a Swedish-style scholarship — where every pupil is worth a fixed amount to new schools — could be implemented at the lower rate of £5,000 a pupil. With state-sector class sizes of 21 pupils (double the average in the independent sector) the economics make sense. Mr Gove could offer a better system, and at a discount: more for less.
But to cut defence spending, while Britain is making no progress in Afghanistan and has handed over to the Americans in Basra, would be a grave concession for a Conservative government to make. It would, in effect, mark Britain’s retreat as a top-tier global military power. Mr Fox has been listing procurement projects that can be cancelled at relatively little cost. But to cut more deeply would confirm to an already anxious Pentagon that the Brits are no longer prepared to finance a war-fighting, as opposed to peacekeeping, military.
Just five months ago, Mr Cameron was speaking about ‘sharing the proceeds of growth’. Five weeks ago, he still spoke about ‘growth in public spending’. Each new phrase he coins seems to be overtaken by events, as the outlook blackens. He is now reconciled to the fact that there will be no such growth — not after the crippling cost of unemployment and debt interest is taken into account. These are indeed Labour’s cuts, the consequence of the failures of Mr Brown’s fiscal policy. It is understandable that the Tories resent that they will be left wielding the hatchet.
But there is a strong moral case to be made for cuts, in that government profligacy makes us all poorer, and that we are knowingly saddling our children with billions upon billions of debt. These are arguments Mr Cameron should be making now. If he comes across in years to come as a squeamish cutter, rather than a man of principle, then he risks provoking the unions, who will wonder if he will buckle under pressure — as Macmillan and Heath did before him. Mr Cameron has been dealt a hideous hand by the government. But he may as well play it with conviction.
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