Given some of the headlines, one would be forgiven for coming to the conclusion that the UK’s treasury secretary, George Osborne, has just catapulted himself into conservative folklore as the man who finally took an axe — rather than a scalpel — to public spending.
For those of us on both sides of the Atlantic long tired of government profligacy, it’s not often we see terms such as “cut,” “spending,” “slash” and “axe” in the same sentence, let alone “roll back the state.” In sum, however, there was really very little that Osborne could do. The finances that Osborne inherited from the Labour government were nothing short of disastrous.
As I stated in a previous article for The Daily Caller, before May’s election “no major economy in recent history has been so over leveraged and saddled with debt without the cushion of either a trade or budget surplus, or holding a reserve currency.” To put these figures in some perspective, Labour’s legacy has left the government spending more on interest payments than on defense, transport or the police.
With plans to cut the current deficit from 10% of GDP to 2% by 2015, just how have state coffers been trimmed? Aside from taking some controversial cuts in middle class benefits and welfare payments, Osborne has given each department — on average — a haircut of around 19%. Obviously some departments were more impacted than others.
And yet — bizarrely — Johann Hari claims in the Huffington Post that this budget symbolizes the “Tea Party’s wildest dreams.” Interesting, given that many Conservatives are somewhat perturbed by the decision to cut the defense budget while simultaneously protecting funds for international aid and the bloated National Health Service, not to mention the previous decisions to hike up the value added tax (VAT) rate from 17.5% to 20%, maintain Labour’s top taxation rate of 50%, slap a levy on banks, and implement “green” stealth taxes. It’s hard to imagine a Tea Partier being too joyous at the thought of more taxes and more spending on socialized medicine.
The cuts to the defense budget are particularly painful for the Conservative Party faithful that continually accused the previous Labour government of neglecting the armed forces when every other department was witnessing its budget go through the roof. Because of contracts signed between the Labour government and the defense industry, the government’s options for cutting back on certain programs are extremely limited.
This is demonstrated by the borderline comedic scenario facing the Royal Navy, which will receive two new aircraft carriers that will not carry aircraft until 2020. In London’s Daily Telegraph, Lord Tebbit — an arch Thatcherite — compared this to having a pub without beer. What’s more, the budgetary situation is so severe that one of the aircraft carriers is likely to be sold, reportedly to India, in a few years’ time. In a nutshell, the United States will have to think twice before calling on the UK to help fight another war.
Not surprisingly, Osborne and the prime minister, David Cameron, have already encountered hostility from the public about the spending review. After all, if cuts didn’t hurt, why would socialist governments create the client state in the first place? And yet, in the face of these impending cuts, polling appears to be endorsing the steps taken by the coalition, with 59% of the electorate supporting the government.
Luckily the coalition has been graced by the fact that the Labour Party seems utterly clueless when it comes to finding the public pulse on this matter. Having emerged victorious from his party’s leadership election purely by virtue of the trade union block vote, Ed Miliband is endeavoring to convince the public that Labour does believe in fiscal responsibility and will not necessarily oppose all of the coalition’s cuts.
Nevertheless, he is also doing his best not to bite the hand that feeds him by upsetting the trade unions, especially those with public sector workers. The main message emanating from the opposition is that these cuts go “too deep and too fast,” and by cutting almost 500,000 public sector jobs the government will be taking money “out” of the economy, “risking a double dip recession.” Time will tell whether this old Keynesian fallacy resonates at the kitchen table as much as it does on the Labour benches.
So what now? The Conservatives and Osborne have a once-in-a-generation opportunity to demonstrate yet again that far from contracting, economies actually boom if the frontiers of the state are rolled back. But that being said, the Labour Party may well be discredited but the electorate — as demonstrated at the last election — are hardly embracing the Conservatives.
The truth is that the real battle has yet to come: whether the Conservatives can actually oversee robust economic growth and not squander a once-in-a-lifetime opportunity to really reduce the size of the state. The cuts identified may well be necessary and significant, but they are far from savage. Spending as a proportion of GDP will fall to 41% from today’s lofty heights of 47%. This is hardly small government. It’ll just be chubby rather than morbidly obese.
A native of Scotland, Ewan previously worked in the London office of Weber Shandwick Public Affairs, Europe’s leading political consultancy. He has contributed to ConservativeHome.com, and YPNation.com, a US blog for young professionals. Ewan is a political consultant based in Washington, D.C.