17 Aug 2010

Osborne’s missionary zeal for cuts

For ten minutes the wheels of deficit reduction paused. The Channel 4 News camera crew had set up in the chancellor’s office, I was on my way at 4.30, and the chancellor turned up early to find his office occupied by cables (no, not Vince).

From this office in the coming weeks George Osborne will take decisions that will determine for the next half decade the fate of hundreds of thousands of jobs, the UK economy and even our place in the world. Forget the 100 days since the coalition launched. It’s the ten weeks till the Spending Review that really matter.

It was Channel 4 News’s first interview with the chancellor, and it must be said that he is rather comfortable in his newish position. The chancellor has missionary zeal for his deficit reduction programme and is utterly convinced that supersizing Labour’s cuts plans is the right thing. Today though, perhaps with due deference to the stand-in prime minister, George Osborne was emphasising the fairness, progressivity, and the contribution deficit reduction will make to growth.

“It’s an absolute fundamental belief of mine that there is nothing progressive about losing control of the public finances,” said George Osborne, having earlier today invoked the former Labour Treasury minister Lord Myners’ similar musings.

First in the way is a protracted battle over the Ministry of Defence budget. Nick Clegg mentioned yesterday that he could understand why someone facing a housing benefit cut might have difficulties with the funding going to Trident.

“People should get used to grown up adult government, unlike the soap opera under Tony Blair and Gordon Brown. When there are differences in opinion they are honestly articulated,” the chancellor told me, though he didn’t seem to endorse Trident warmly.

I asked him about the suggestion that the whole capital cost of Trident was to come off the MoD budget, effectively a further cut.

“I’m very clear that the replacement of the nuclear deterrent – the Trident renewal programme – has to come from the Ministry of Defence’s budget. And they [the MoD] know that.”

It, particularly the last four words, seemed something of a stinging rebuke to the defence secretary’s suggestion, made on Friday that: “How [the Trident] budget is funded is a conversation that is constantly ongoing with the Treasury”.

The really important thing here is that the battle over defence funding is simply the most public of a series of private conversations being had right now.

Cathy Newman detailed the DWP-Treasury spat over the winter fuel allowance today.

Take transport, which faces cuts double that of the MoD. Today’s RPI inflation figure of 4.8% could lead to price rises on some commuter lines of 10%, I am reliably informed by the train industry.

Then think universities, culture, justice etc etc.

More on Osborne’s economic assessment and fairness agenda tomorrow. Let me know what you think of the interview.

6 reader comments

  1. Sean says:

    I’m not on housing benefit and I think Trident is a complete waste of money! Does anyone really think that the public want to spend billions on new nuclear weapons at a time when local services, the NHS, and schools and colleges are facing big cuts? The view that military spending must come before anything else may be cool in countries like North Korea and Burma, but it’s going nowhere in the UK.

  2. Charles Jurcich says:

    As I understand it, the cost of Trident would be born quite gradually. Regardless of the politics of Trident, we could bare its cost as well as paying a reasonable level of Housing Benefit.

    The trouble is that all the ‘new’ money that enters the economy, only ever enters it on the supply side (QE, bank loans etc). The automatic stabilisers will help to stabilise the economy, but to stimulate it, we need new money on the demand side (not just QE). This needs to be at the level of low incomes, as low income households spend more (save less), and this means real stimulus.

    Oh, and don’t increase VAT as it would indirectly raise Govt Debt interest on new loans, and put the MPC in an awkward position.

  3. adrian clarke says:

    I believe we should have a nuclear weapon but i have not heard a clear concise reason given as to why we need a new breed of trident unless it is to bolster the US arms industry.What will happen to our existing nuclear stocks? How will they be decommissioned.If they are kept,what is their useful life and why is it limited?What is the useful life of the delivery system and again why is it limited,plus what is the cost of decommissioning those delivery systems.
    Would the likes of Iran or N.Korea be able to stop our delivery of nuclear weapons with the current system , were they to be used?

  4. Andrew Dundas says:

    Some known facts:
    * Submarine based systems counter the 1950s risk of a massive fusillade of Soviet missiles that could wipe out all retaliation capacity. That risk is insignificant nowadays: Russia & others are dependant upon trade with us now. Besides they (correctly) fear fall-out effects upon themselves.
    * Trident replaced Polaris because the US would no longer maintain it. Likewise, latest Trident missile is too tall for current submarines so we either replace those with new subs and missiles – or abandon a submarine based system. And submarines wear out!
    * All Inter-continental systems require US satellite guidance to hit their targets.
    * N Korea, Iran et al are very vulnerable to both bomber aircraft and cruise missiles: if those types are our potential nuclear adversaries, we don’t need the much bigger cost of Trident subs.
    Opinion: What we do need are lots more submarines to protect our N Atlantic & European maritime interests. [So we definitely need Barrow’s yards.]

  5. Tony Reynolds says:

    We are still have the illusion that we are under threat, and need a nuclear response. The main threat has been from within this country. the idea of spending a unlimited amount for a wepon we cannot use confirms we are driven by a unreal idiology. the type of armed services should reflect our committment to europe and NATO, the costs of defence should be met by the E.U. who benifit most from defence spending.

  6. Charles Jurcich says:

    I don’t think that now is the time to get rid of our nuclear deterent. Part of the reason that there is no current nuclear threat to the UK is BECAUSE we have a nuclear capability (perhaps).

    With the worst economic threat since the Great Depression (and this may become much worse still), who knows what facist powers may arise.

    Until governments around the world take back control of their money supply from their central banks, we’re all in for mass unemployment, and all the problems which follow on from that.

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