Parties struggle on where spending axe will fall
Updated on 28 April 2010
The three main parties struggle to respond as business leaders join economists in criticising politicians for lacking fully-costed plans to tackle Britain's debt crisis.
Labour, Conservative and Liberal Democrat leaders have all stressed their plans for tough controls on public spending to help cut the £163 billion deficit in the wake of yesterday's report from the Institute for Fiscal Studies accusing them of failing to come clean over the scale of the action needed, whoever wins the election.
As the parties prepared to address the annual convention of the Institute of Directors in London, they were given a stern warning from the Institute's director general, Miles Templeman, that government needed to be "downsized".
"We're a week from the General Election, but we're still years from bringing the deficit and the size of the government under control," he said.
"If the truth be told, no political party is advocating the scale of spending and deficit reduction we need, not just for the next few years, but for the next decade. If British business is to compete effectively in the 21st Century, we need a fundamental root and branch reform of the state.
"Government has got to get smaller and better. Unless we shrink the state, the state will shrink the economy."
The Liberal Democrat Treasury spokesman, Vince Cable, told the conference that his party had been more specific than either Labour or the Conservatives in setting out plans to cut the deficit.
"We have to face some basic taboos," he said. "There have to be cuts in some welfare payments - reducing payments for pensioners under 65 under winter fuel payments, reducing entitlement to child tax credits for high earners and scrapping the child trust fund - it is a good idea but we can't afford it.
"Public sector pensions are running out of control - particularly at the top. We can't ring-fence spending by government departments, which merely ensures that some really useful spending is cut deeply to protect bureaucracy in other higher-profile departments."
But he dismissed Conservative claims that they could reverse Labour's increase in national insurance payments through efficiency savings. "Efficiency has become the new politically-correct word for sacking people and cutting services," he said.
The Conservative Shadow Chancellor, George Osborne, told the conference that no opposition in history had said as much as his party about what it planned after the General Election.
There would be an emergency budget within 50 days of the election and its first purpose would be to begin to tackle the deficit by introducing £6 billion worth of savings, to show that Britain could live within its means.
"I have said that we need to freeze public sector pay for one year for all but the lowest-paid million people in the public sector. I have said we need to stop paying tax credits to families with incomes over £50,000 and stop handing out baby bonds to better-off families," he said
"I have said we need to get much tougher with welfare abuse and cut incapacity benefit for those who are assessed as fit for work.
"I have said we need to bring forward the moment when the state pension age rises to 66 and I have said we need to lead by example by cutting the number of MPs by 10 per cent and cutting the pay of Ministers by five per cent."
He added: "Have we ever pretended to you that these are all the things that we need to do? No. Anyone elected next Thursday will have to do more. We will have to do more."
Questioned on the IFS report at Labour's morning news conference, the Business Secretary, Lord Mandelson, acknowledged that there would be more pain to come after the General Election. He said that Labour had already been clear on the need to cut spending by £38 billion to halve the structural deficit and had set out plans for tax rises totalling £19 billion.
"Nobody can forecast what the impact will be on incomes and living standards in this country because it depends so much on our resumption of economic growth," he said.
"There will be around £38 billion of reductions against our present plans that will have to be found. But if you are asking me for the specifics of each cut in each department's spending, you know it is not possible at a time like this to set out that detail.
"We are coming out of an economic and financial hurricane, but we are not clear of it yet."
