Alistair Darling: we will cut deeper than Margaret Thatcher

[Hopeless Romantic]

Thinktank warns of 'two parliaments of pain' with spending slashed by 25% to repair black hole in finances

Alistair Darling admitted tonight that Labour's planned cuts in public spending will be "deeper and tougher" than Margaret Thatcher's in the 1980s, as the country's leading experts on tax and spending warned that Britain faces "two parliaments of pain" to repair the black hole in the state's finances.

The Institute for Fiscal Studies said hefty tax rises and Whitehall spending cuts of 25% were in prospect during the six-year squeeze lasting until 2017 that would follow the chancellor's "treading water" budget yesterday.

Asked by the BBC tonight how his plans compared with Thatcher's attempts to slim the size of the state, Darling replied: "They will be deeper and tougher – where we make the precise comparison I think is secondary to an acknowledgement that these reductions will be tough."

The shadow chancellor, George Osborne, seized on the first admission by the chancellor that Labour was planning greater austerity than that achieved by Thatcher's chancellors Geoffrey Howe and Nigel Lawson. "Labour has been found out. Gordon Brown is basing his election campaign on the claim that Labour can go on spending. That is completely blown apart by Alistair Darling's admission, under pressure, that Labour's own budget numbers imply deep cuts. But why didn't he admit that yesterday? Twenty-four hours on, this empty budget has completely unravelled and Labour's failure to act will hit families hard."

Robert Chote, the IFS's director, said he was wary of the chancellor's claims that he could raise £11bn through efficiency savings, and added that capital investment in Britain's infrastructure would bear the brunt of the cuts. Current Treasury plans implied reductions in capital spending of almost 15% a year for the next four years, Chote said.

The IFS used its post-budget analysis to spell out what was in store for Whitehall departments, but said there appeared to be only a modest difference between the plans of the two main parties.

Assuming that the Conservatives wanted to eliminate Britain's structural deficit over a five-year parliament, a David Cameron government would have to find an extra £8bn of savings.

The thinktank said Labour's plans implied a cumulative decline of 11.9% in departmental spending on public services and administration over four years, a cut of £46bn in inflation-adjusted terms.

But a two-year government pledge to protect spending on the NHS and schools, and to raise overseas aid to the UN target of 0.7% of national output, will result in deeper cuts of 20% for those departments not protected, the IFS said. If the government continued to spare health and education for a further two years, departments such as transport, defence and the Home Office would face budget reductions of 25%.

The IFS said that the planned austerity would reduce public spending as a share of the economy from just over 27% to below 21% and return it to its level in the late 1990s, when it began a decade-long rise. A government that wanted to slash the deficit without inflicting such deep cuts would have to raise taxes or reduce welfare payments instead, the IFS added.

Chote said there was a lack of clarity about how either Labour or the Conservatives planned to tackle deficit reduction. "There are an awful lot of judgments still be made, or revealed, notably with regards to public spending over the next parliament. This greater-than-necessary vagueness allows the opposition to be vaguer than necessary, too."

The budget, Chote added, had failed to provide a detailed picture to voters and the financial markets of the "fiscal repair job" in prospect after the election.

"Of the £46bn a year of real cuts in public services spending that we think budget forecasts would require by 2014-15, the government would presumably claim to have 'found' about £20bn by 2012-13 from pay restraint, cutting programmes and efficiency savings. We should be wary of some of these claims, particularly on efficiency.

"First, because it is not obvious that the efficiency savings would be delivered. Second, and more fundamentally, if they are cutting out genuine waste we would expect the government to try to achieve most of these efficiencies even if it was not having to cut public spending overall."

The IFS said that the slight improvement in the state of the public finances in recent months had reduced the size of the structural budget deficit – borrowing that will not be eliminated by faster growth – from £73bn before the budget to £67bn.

Chote said: "Presented with this good news, the chancellor had a choice: to give away his good luck in pre-election bribes, or to bank it and bring government borrowing down more quickly as the recovery takes hold. Perhaps in the face of pressure to do otherwise by the "forces of hell", he has sensibly chosen to do the latter."

http://www.guardian.co.uk/politics/2010/mar/25/alistair-darling-cut-deeper-margaret-thatcher

[fedsron2us]

1. Thatcher spending 'cuts' are a myth oft repeated

Public spending rose throughout most of her years in office and those cuts that did occur happened in the middle and end of her period in office not at the beginning where most imagine

http://blogs.ft.com/westminster/2010/03/worse-than-thatcher-she-raised-public-spending/

In fact most of the supposed 'Thatcher' cuts were made by Denis Healey in the 1970s. He froze civil service recruitment and introduced various other austerity measures into the public sector which ironically led to the Winter of Discontent and to Labour's defeat in the 1979 General Election. Sadly most peoples memory of that era has become severely distorted by the media who often conflate the miners strikes and power cuts of the early 1970s, which happened under Ted Heath's Tory government, with the Winter Of Discontent. In reality they occurred five years apart and under completely different governing parties

Britons are actually fonder of public spending than most MSM commentators realise. The experience of the past suggests that when cuts come they can provoke a surprising amount of popular discontent. Which ever government introduces them will not survive beyond one term.

[Hopeless Romantic]

2. Really? Perhaps she wasn't so bad after all then

[fedsron2us]

3. No she was the person who laid the foundations for all our current economic woes

by encouraging the City of London over manufacturing industry as the basis of the British economy. She also abolished credit controls to the cheers of the financiers and thus begun the huge expansion of private debt that led the banking system to the edge of collapse. The truth is that she did only attempted to exercise fiscal discipline in one part of the economy. Everywhere else things were allowed to let rip


Much of the the so called public sector debt that the city now likes to whine about has in fact arisen as a direct result of bailing out the financial system which has crashed after years of Thatcherite abuse. The losses of the financiers have been essentially been passed to the masses in one of the biggest attempted con tricks in history. Its socialism for the rich and the free market for the poor. The problem for the elites is that I dont think the suckers are likely to be buying it much longer. There is a whiff of Bourbon decay hanging over the Ancien Regime and we all know where that ended.

[LeftishBrit]

4. No, she was seriously bad

Obsessed with privatization, and ran down British industry in favour of banking and finance (which contributed to the present mess). Crushed the unions, which has helped to prevent industry from regaining a foothold. Encouraged a harsh and selfish attitude that people should be judged by how much money they can make; that there is 'no such thing as society'; and that poverty and other misfortunes are usually by implication the fault of the victims.

I would also add that a lot of the apparent increase in public spending was due to her policies leading to massive increases in unemployment. Although her government cut benefits, the level of unemployment increased so much that it still caused a lot of increased spending on the dole and on training schemes.