If, like us, you’ve spent the last few weeks thinking that all this talk about hung parliaments, electoral reform and so on has shifted attention away from our most pressing problem – i.e. what the heck are we going to do about the fact that we have a bigger budget deficit than Greece, the supposed sick man of Europe – then you’ll be equally grateful for the contribution of the Institute of Fiscal Studies today. In a new report, the think-tank claims that all three main parties are failing to tell us the whole truth about how they’re going to achieve the vast majority of their proposed spending cuts. Since these cuts will determine what kind of country we live and do business in for the next four or five years, surely this ought to be front and centre of the Election debate?
According to the IFS, the Lib Dems, Labour and the Conservatives have failed to specify how they’re going to find £34.4bn, £44.1bn, and £52.5bn of cuts respectively. That’s about 74% of the total promised by the Lib Dems, 83% of the Tory total, and 87% of the Labour total. In other words, this isn’t just a huge amount of money (equivalent to the biggest spending cuts since the Second World War, in the Tories’ case). If the IFS is right, it means the parties are obfuscating about the vast majority of their taxation and spending plans; IFS director Robert Chote said all three parties were being ‘strikingly reticent’ about their true intentions. Cue lots of hand-wringing in the media that the politicians are treating the electorate like idiots.
To some extent this is justified. But is anyone really surprised? Talk of cuts and an age of austerity just invites criticism from opposition parties and affects a party’s popularity. When the Tories started talking about public sector pay freezes and such last year, they were hammered by the Government and took a beating in the polls. So it’s hardly any wonder that all three parties are happy to stick to vague pledges, without spelling out all the nasty detail involved. Equally, until the Government produces some concrete plans, it’s a bit hard for opposition parties – who don’t have access to the same level of data – to follow suit.
But the problem is only going to get worse. Look at Greece, which took another hit yesterday when its credit rating was downgraded to junk status by the ratings agencies, pushing up the cost of its borrowing. Our national debt may be smaller, relatively speaking, but we’re living just as far beyond our means as Greece is. So to avoid the kind of problems they’re having in Athens at the moment, whoever wins the Election is going to have to make some very painful decisions, very quickly. And we probably won’t like it. Which is why we suspect this IFS call is likely to go unheeded.
In today's bulletin:
Politicians deny misleading us over deficit - as Greece slips again
Shell profits rise by 50% as cost-cutting begins to pay off
Our clients can look after themselves, Goldman insists
Editor's (guest) blog: 'My Peppa Pig hell' by Marnie Gwyther, aged 11 months
The £55bn problem: rise in corporate strugglers dampens recovery hopes