Breaking new ground
The Conservatives’ pre-emptive attack on the government’s plans to raise National Insurance has achieved something important. As the campaign proper finally begins, it has shifted the grounds of the debate.
For months, the discussion about cutting the budget deficit was dominated by the when, and the how much – debates in which the true differences between the parties were fairly small. But thanks to the Shadow Chancellor, we are now also talking about the how. There, the differences are not enormous either. But they are telling.
Senior Conservatives are now putting all their rhetorical energy behind the idea that there’s a right way and a wrong way to cut the deficit. (In case you missed it: spending cuts good, tax rises bad.)
This shift of emphasis may or may not help their party. But for voters, it might, just might, produce a more meaningful campaign.
How so? Well, for starters, the debate about how to cut borrowing does reflect a genuine point of difference.
True, everyone (or nearly everyone) thinks that public spending cuts need to make the largest contribution to bringing the deficit down. For Labour the ratio of spending cuts to tax rises is about 3 to 1 – for the Tories it’s 4 to 1. But as we all know, behind that smallish difference of emphasis lies a larger difference of doctrine.
At the margin, the Conservatives want you to know they will fear tax rises more than spending cuts. Labour wants you to know that, in a tight spot, they will put public services first.
It may sound like a trip down memory lane to depict the two parties in this way. But that is what the past week has really been about. In effect, Labour and the Conservatives have been reminding voters that, when it comes to the deficit, the old biases still apply.
You might have come to that conclusion about Labour already, from the fact that the role of tax rises in the Chancellor’s deficit reduction plan has grown steadily since it was first unveiled (that ratio used to be 4 to 1.) Now Mr Osborne has shown some old colours too, complicating his message on the deficit with talk of reversing most of Labour’s ‘tax on jobs’.
I should say at this point that what the Liberal Democrats’ basic instinct would be is much less clear.
That is one of the many downsides to the rather false debate about the public finances that we’ve had so far: Britain’s third party has been able to sound like the voice of reason, without ever really telling us what it would do. As of today, it is not entirely clear, for example, whether the party would protect any public services from cuts. Vince Cable says no. But other senior members of his party, including his leader, have been less clear. Apparently we have to wait for the manifesto to find out.
You’ve seen the economists battle it out over the timing of deficit cuts. Will we see the same war of words from them over the national insurance rise? Perhaps. But in the basic choice between tax rises and spending cuts – as I’ve written in the past – the academic literature is unusually clear. In normal times, the evidence suggests that spending cuts are less harmful to the economy than tax rises.
Needless to say, the economists – and everyone else – can still have a debate about whether these are normal times. Labour’s basic argument is they are not: after an unprecedented global financial crisis, we can’t count on private demand to fill the gap.
That takes us back to more well-trodden ground. But there’s another reason why the debate over the national insurance rise is useful: it introduces a knowingly abstract debate to some brass tacks.
Once they had said they wanted to avoid the National Insurance rise, the Conservatives were forced to commit detail in describing what they would do instead – much more detail than we have had from them before.
Yes, Labour would say not enough – because the efficiency savings are not spelled out by department. But as I said last week, the government has not exactly been a model of specificity in this area either.
From them too, the Tories’ move on National Insurance has forced more detail about their efficiency savings than they had ever provided before. (After all, to show how the Tories were duplicating their plans, they had to indicate what those plans actually were.)
There are risks here for both sides. Labour are clearly uncomfortable talking about the impact on the economy of higher taxes next year. And the Conservatives may find they have to choose between a promise to cut borrowing further, faster, than Labour, and a promise to avoid further tax rises. George Osborne has not (quite) given the second promise yet. Without the National Insurance rise, it’s not entirely clear he can offer both.
But, here too, this might end up telling voters things they would like to know about a future government.
No, it isn’t the honest debate about Britain’s budget choices that commentators say the voters deserve. But it’s a start.
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