Something has to give

The most important part of David Cameron’s speech was not any of the extended passages where he told us that he had character and judgement, but this bit:

But we need fiscal responsibility too. So we will rein in government borrowing. You know what that means. The country needs to know what that means.

What it means is that lower spending will be more important than lower taxes. This should disappoint both the slash-the-state core vote and all those who have only floated over in the Tories’ direction after much assurance that public services won’t suffer.

But more substantially, this principle seems very shaky when you judge against it those aspects of Cameron’s “plan” that he’s deigned to tell us about.

The proposal that groups of people can set up new state schools if they don’t like the local ones has some fairly hefty upfront costs, and the supposed benefits are very distant. Paying private firms to get welfare claimants into work will cost more in the short term, and only save money in the long term if there are enough jobs around to significantly reduce welfare rolls.

The inheritance tax cut is clear and unambiguous; the levy on non-domiciles that would pay for it contains much devilish detail, as Alistair Darling can testify from experience. And the council tax freeze will definitely cost money, while the cuts in bureaucrats, consultants and communications that will pay for this are – as are all such proposals from oppositions – uncertain aspirations.

Time after time, the cost savings are much less certain, or much farther into the future, than the tax cuts that they’re supposed to pay for. The so-called ‘sharing the proceeds’ idea can in theory work on all three fronts (paying off some debt, cutting some taxes, avoiding actual public spending cuts – although even just slowing the rate of spending growth is likely to result in services suffering), but unless you have strong economic growth, it takes time to have much noticeable impact.

So if Cameron and Osborne are truly serious about reducing public debt – and they’ve gone to some length this week to convince us that they are – then either tax cuts are going to have to wait quite some time or public spending cuts are going to have to be larger and faster than the ‘compassionate’ rhetoric has suggested.

Perhaps another quote from the speech gives a flavour of Tory policies to come:

I will be asking all my shadow ministers to review all over again every spending programme to see if it is really necessary, really justifiable in these new economic circumstances.

One possibility: they regularly promise not to abolish tax credits. But they’ve avoided, as far as I know, promising not to dramatically cut them.

But an equivalent post could be written about Labour, and how Gordon Brown intends to pay for reducing poverty further, expanding nursery provision, and so on. Whoever wins the next election is going to have less fiscal room for manoeuvre than they’d like.

Labour has been serially worried about being seen as the party of ‘tax-and-spend’; likewise the Tories about being seen as congentical cutters. Despite the many attacks they exchange, neither quite dares to engage the other openly on this central issue. But while the differences between the parties are neither as overt nor as large as in the 1980s, their opposing instincts are still unmistakable.