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Spending will become more significant as 2015 approaches

24 March 2012

Four days after George Osborne signed its death warrant, there is still
life in the 50p rate yet. The two main political interviews in today’s papers — Ed Miliband in the Telegraph, Danny Alexander in the Times (£) — both focus heavily on the top rate’s impending demise. The Labour leader, of course, is
continuing to ask whether David Cameron and George Osborne will themselves benefit from the move to 45p, without actually managing to commit his party to a policy. The Chief Secretary to the
Treasury is left defending a 45p rate, and does so by borrowing a recent Lib Dem slogan for the coalition as a whole: ‘This is a Budget for the millions, not the millionaires.’

But it’s another part of the Alexander interview that could turn out to be far more politically significant. It relates the post-2015 landscape that I blogged about recently. If you remember, last November George Osborne extended the ‘fiscal horizon’
of his Budget to include the two financial years after the election, 2015-16 and 2016-17. This encoded two more years of cuts into the political timetable, so that the deficit could be whittled
down to naught. Today, Alexander confirms — as he’s suggested in the past — that the Lib Dems will go into the next election backing those cuts:   

‘The slogan “We’re all in this together” now seems to apply more to the coalition than the country. The Lib Dems have apparently signed up to a shared project with the
Conservatives that goes beyond the next election. Mr Alexander confirms that his party will honour the spending commitments made by the coalition, which extend two years into the next

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Why so politically significant? First, because — as Alexander himself seems to acknowledge — this could be another issue to separate the Lib Dems from Labour. But also
because it could separate the Lib Dems from the Tories too. The two coalition parties may agree on the sum of the cuts, but they may not end up agreeing on how those cuts are apportioned. Alexander
hints at this in typically diplomatic fashion: 

‘As Chief Secretary, his main responsibility is spending rather than tax. In the Budget the Chancellor announced that the Government would need to make £10 billion more of savings
in welfare by 2016 to stick to its deficit-reduction timetable. But Mr Alexander insists that this was only “an illustration” of the kind of cut that could take place. “We
haven’t begun to make those decisions yet. I think it’s right to try and open up a debate about those issues because there are some pretty fundamental choices that have to be made
about how we use our resources.”’

The IFS outlined some of this balancing act on Thursday. If departmental spending cuts
carry on at the same rate, they said, then there would need to be about £8 billion of extra welfare cuts to match Osborne’s projections. If there were no further departmental cuts, then welfare
would need to be cut by an extra £20 billion. Where to draw the lines will surely feature heavily in the Quad’s meetings in two or three years time. And the differences between the Tories and
the Lib Dems then could tell in their manifestos.

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Show comments
  • Fergus Pickering

    A right wing tory mob? I like it.

  • Rhoda Klapp

    If he gets the growth, the 50p rate won’t matter. If doesn’t get the growth, it won’t matter. Therefore it doesn’t matter at all. Now, what are they doing for growth? Absolutely nothing save a little fiddling round the edges. What are they doing counter-growth? Practically everything they do. Stop doing stupid things. Get a grip.

  • geoffm

    What we need is beyond Thatcherism the clear blue beyond where all socialism is ground into the sod. Life without czars commissions and other assorted soviet bullshit festered upon us by thelikes of blair brown and their sucessors.

  • toco

    Red Ed should be asked whether he and/or his close family have avoided paying the full amount of Inheritance Tax by astute dare one say opportune tax planning!A simple ‘yes’ or ‘no’ would suffice but those who throw stones must ensure they are not being hypocritical.

  • daniel maris

    It’s amazing how Speccieariat address all manner of minutiae but fail to address various elephants in the room, most obviously mass immigration which, running at 500,000 per annum NET, is overloading our infrastructure (housing, health and transport), reducing our per capita economic growth and sabotaging our efforts to improve education in inner urban areas.

  • TomTom

    This is absurd. We live in a world where Bundesbank Gold Reserves are in New York and re-hypothecated with a 685 billion Euro TARGET2 liability on the Bundesbank books – if Greece or Spain cracks, Germany is gone and little Cairngorms National Park Danny Alexander is talking about 2015 onwards !!! He might think about how the country will survive to 2014 first.

  • Dimoto

    Roll-on Easter.
    At least that will give us a break from this entirely synthetic, media frenzy about the budget, whilst the hacks slope off on leave.

  • Russ

    Except Blair was more thatcher than Thatcher…

  • telemachus’

    The we’re all in it together cannot go beyond the election.
    The Tories will clearly rise to the top of the soup. The LibDems will be left in the mud as a Grimond rump.
    Then if Labour cannot ditch Miliband we will be in trouble with a right wing Tory mob more Thatcher than Thatcher.

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