Tory Tax Cut

Virtually the only journalist in the Sunday papers to question the wisdom of the Tory policy was the Sunday Times economics editor David Smith, incidentally next to a damning assessment of Sir Stuart Rose, the chairman of the Marks and Spencer, and one of those "successful businessmen" who - surprise, surprise - does not support an increase in NICs.

Smith made the simple point that shelving the NICs increase from April 2011 "represents an unmistakeable softening of the Tory Party's fiscal stance".

But Labour is slowly mustering four lines of attack.

First, the £6bn in efficiencies "identified" by Sir Peter Gershon and Dr Martin Read is based on both men each writing two sides of paper, hardly evidence-based policy making. As Mandelson pointed out yesterday on Sky News, neither man has made himself available for interview to explain how they came to their views on which the entire Tory edifice is built.

In interview last week I suggested to shadow chancellor George Osborne that Gershon and Read's work resembled the prejudicial musings of a couple of businessmen sharing a drink at the 19th hole. He replied, correctly, that he did not think I appeared to be the kind of person that frequented golf courses, before making the more serious case that these were senior businessmen, and Gershon had a track record in this area both with the British and Australian governments. Productivity in the public sector is just not rising fast enough. Indeed in the case of the NHS it is falling, Osborne argued. But the point remains this work is based on bald assertion, and should not be allowed to survive an election unchallenged.

Across the four pages of suggestions, it is hard to find a tangible proposal, beyond re-negotiate contracts, sweat assets more and sell property. Read does suggest that there should be a blanket policy of non-replacement of staff that leave. He asserts staff turn-over is running in the public sector at 8 %. But are the Tories backing a freeze in public sector recruitment, ie a reduction in the public sector labour force of 8 % in the the current year ? No, Osborne says he is not proposing any cut-backs to front line staff in schools and hospitals.

Second, Labour is also beginning to make the point that this £6bn in efficiencies looks increasingly like a straightforward cut. Cameron has himself said the £6bn cut will happen whether or not the efficiencies, ie higher productivity, are found. It will certainly be very hard to make £6bn in efficiency savings in such a short space of time if they are to be over and above the billions Labour has already committed to make in 2010-11.

Third, the Tory policy, as Brown will say in interviews today, will still be taking money out of the economy this year just when the recovery is most vulnerable.

Fourth, the Tory efficiency savings represents, according to the IFS, a 2.8% cut in spending in 2010-11 outside the three Tory ringfenced departments health, defence and overseas aid, broadly double the cut set out by Labour. Ed Balls at a teacher union conference tomorrow will claim the schools budget is specially vulnerable, saying the IFS figures suggests a £1.7bn cut to schools in 2010-11.

(Source: Guardian)

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