8 Apr 2010

Tories bask in business leaders’ support – but questions remain

I give day 2 of the Electionomics Debate to Labour.

This fight back is obviously relative to the punishment meted out from the Tories by the letter-writing skills of business leaders last week, but the nerdish rigour of Labour’s dossier on Tory NICs plans was impressive.

Clearly, the Conservative plan is to use the cover of a few dozen important businessmen as a shortcut towards giving their plans a veneer of fiscal credibility. I think the fact that businessmen like cutting taxes on business only takes you so far.

I think it is a fact that the Conservatives have banked Labour efficiency savings that they had previously derided. And then they have argued they can make even more. If efficiency savings are a flaky way of making spending cuts, then the Conservatives are even larger, and are mathematically more questionable.

I don’t mean to say that this proves the Conservatives aren’t capable of making these cuts, and I can see why business leaders, such as Sir Stuart Rose say, that it would be better to cut spending and prevent National Insurance going up.

The great con of ‘efficiency cuts’ though, is that these cuts can be made painlessly, with no impact on frontline public services. Now, to their credit, the James report which the Tories commissioned in 2005 contained 177 pages of detailed suggestions about cuts that could be made department by department.

Everything from a costed reform to Legal Aid to £8m from the overlapping of Sports governance administration, and a 15 per cent cut to civilian MoD staff. For every department there was a quantified assessment of whether the Tory James Review figures were additional or overlapped with the Gershon (then Labour) efficiency savings.

For example in 2005, David James identified that £217m of Education efficiencies overlapped with existing government plans. Almost nothing was scored in year 1. An extra £12bn of annual savings, above government plans (the same number as Osborne’s plan) only kicked in after three years.

So what does this all mean? It means that the current Conservative approach is not even a patch on its attempt at the last election. The ‘flimsy four page press release’ that the PM referred to, does have some good ideas. Not all of them overlap with existing government plans.

But they are a set of tactics, rather than identified savings, as outlined by the Tories in the past. The idea that they fund lower taxation through pain free public service spending cuts is totally unproven. Yes George Osborne will cut anyway.

And he did tell me last week that ‘I will not allow Cabinet ministers in a Conservative government to come to me with frontline cuts’. But the four pages do not go anywhere close to showing that these cuts will all be from waste.

Perhaps Gershon and Read can explain more, but they seem to be more elusive than a game of hide and seek with Robin Hood and the Scarlet Pimpernel.

8 reader comments

  1. Arthur Complainer says:

    There’s not enough detail from any party. Let’s put them all to the test.

    The Environment Agency recently outsourced its CIS Service Management function at more than double the cost of providing it in house.

    Why don’t you ask each of our potential Chancellors what action they’ll take in respect of the potential for cost savings from renegotiating this arrangement?

  2. Glenn Beardshall says:

    I heard tonight a figure of 40,000 jobs would be lost in the public sector if the Tories win. That represents a 0.6% headcount cut across the public sec, now lets say we avoid NHS, MoD & Home Off it represents about a 2% headcount reduction in other government depts. So will the public sector now get real ! My industry in the last couple of year has shed 20% of jobs. As a sector we have lost 15% of jobs to overseas becuase of better cost base, other overheads and relocation of HQs. So adding a 1% to NI is a totally self defeating way to recover jobs in the private sector which creates wealth. So honestly can we get real about this and be honest that NI is being used by Labour as a stealth Tax…They promised not to raise Income tax but instead use NI which hits both employee and employer. It is time the private sec was set free rather than been burdened by more. In times of defecit, the government should have the humility to admit it has overspent and reign in its ever burgeoning budget. One final statistic average private sector wage increase in 2009 -0.2% , public sector 3.8%…..so where do we think restraint is needed. NI reductions are not economically illiterate.

  3. Iain says:

    In the electoral tax battle, why does no one challenge Labour’s mantra of misrepresentation of the Tory inheritance tax proposal. Ministers constantly dismiss it as benefitting “a few millionaires” or the “300 richest estates”. In fact it will benefit everyone in the UK who leaves an estate between £325000-£1000000, including a vast number of householders in London. It is time this sloppy and erroneous dismissal was fact-checked and then challenged.

    1. Andrew Dundas says:

      Iain, you have been misled. Inheritance tax for a married couple has always been twice the limit. Anyone who’s married and with a potential estate of over £300k used to set up a Trust to take advantage of the spouse relief. Those Trusts were why this issue first arose.
      What the Labour Government did was to make that wheeze available to everyone: so the potential Estate Duty nowadays is only payable above a net £650k. Only a very small number of estates are for a £million – even in the London area. So the Tory plan really is only for a super-rich minority.
      In practical terms, no one can take anything with them after death, so the best way to avoid Estate Duty is to give most of it away while you can!

  4. adrian clarke says:

    Faisal from where do you detect Labour has won???Forlorn hope?? They are on the ropes and every time they wheel out Brown and Mandelson they are likely to slip further behind .With all the crazy non jobs , over burdened bureaucracy there is plenty of room for cuts without effecting front line services.Business realises this .Didn’t you watch the way Rose put Jon in his place last night.If we do not strive to help business in the private sector, the wealth creators and cut the cost of the public sector (the takers of wealth) we will soon be in the position of Greece.Another British Labour government will have to crawl to the IMF .I believe their attitude shows we may be in a worse position than they admit to.

  5. Andrew Dundas says:

    What’s missing from this debate is the matter of timing and uncertainty. No one would be paying the extra National Insurance until May 2011.
    Given the predictions of the Bank of England, the OECD and the National Institute for Economic & Social Research (published today) that the UK economy is likely to grow faster than Darling forecast in his budget, tax revenues may have recovered much more lost ground by then.
    Nobody knows exactly when and how much tax and dividends our Banks will be paying us in 2011. Their recovery is crucial but currently not forecastable.
    Maybe the precaution of signalling a NIC increase more than a year early will turn out to be un-needed?

    1. adrian clarke says:

      If you are true Andrew then it matters not how the Tories are to fund not raising extra tax .That Labour makes such a fuss about it is that the financial situation is probably much worse than they admit to.As for your continually harping on about growth.The pound has been devalued against the dollar by 25% in the last year , if we can not get increased growth from that alone we are in a mess.That growth though is worth 25%less than it aught to be .It is time this government went and we never again let a Labour government ruin this country

  6. John St.Claire says:

    Just an observation. The majority of business leaders who agreed with the Conservatives. That a rise in National Insurance would be a tax on business, denied that they were motivated politically. But one can only wonder on how immaculately timed the release to the media was.

Comments are closed.