thetorydiary

(1) The prospect of an easy Tory victory does not excite the media. They'd much rather have a horse race and so their current inclination is to jump on any story that suggests the Tory machine is misfiring. The kerfuffle over the timing of Tory spending cuts has given the media plenty of ammunition in recent days.

(2) The Tories have committed to eliminate the bulk of the structural budget deficit by the end of the first parliament. This the most important of these five observations.

(3) The Tories now seem to be shifting the reductions in spending away from the first year. The Tories will make a start in cutting spending in year one but that start may be more modest than some of us hoped.  I think it is necessary to cut quickly because (a) international investors need reassurance and (b) because backloading cuts to the later stages of a parliament will make re-election harder.

(4) The Tories will get rid of most of the deficit by cutting spending. Labour will rely mainly on tax rises. In that difference is clear blue water.

(5) George Osborne plans progressive reductions in corporation tax as part of an overall ambition to "improve Britain’s international rankings for tax competitiveness" (one of today's slightly dull benchmarks). That's more clear blue water.

Tim Montgomerie

After a weekend when the Conservatives appeared to soften their position on early spending cuts, Philip Hammond (Shadow Chief Secretary to the Treasury) told The Daily Politics that the Conservatives planned to “eliminate the great bulk of the structural deficit by 2014”.  Mr Hammond said that it was “important to send signals to the markets [that we] have a credible plan, over the life time of a parliament, to get the deficit down.”

Andrew Lilico, Chief Economist of Policy Exchange, writing on CentreRight, warns that early cuts are vital to avoiding economic disaster:

"We have seen in the case of Greece – a country with a much lower structural deficit than the UK, though arguably higher government debt (excluding off-balance-sheet items) – how rapidly financial markets can punish delinquent fiscal policy once the political will to address it is not there.  Greece now has interest rates on its medium-term debt some 4% higher than those in Germany.  This, for the UK, would have the consequence of households paying an average interest rate of something in excess of 9%, on average, over the lifetime of their mortgages – an economic catastrophe for an economy already so over-indebted. The issue is thus not whether early spending cuts would bring about a double dip: there will probably be a double dip now, with or without early spending cuts.  The issue is how much worse the double dip would be if spending is not cut.  And the answer is: disastrously worse."

There is also the political danger of waiting until the second, third and fourth years of a parliament to reduce the deficit; the biggest cuts will be being made very close to a re-election bid.

Meanwhile the Tories have released their own "Labour Chaos On Cuts" attack...

CCHQ lists contradictions in Labour's fiscal strategy:

"Treasury Ministers say there will be “extremely painful” cuts under Labour, but Gordon Brown says spending will carry on rising."

"Treasury figures already imply 17% cuts in non-protected departments under Labour, but Gordon Brown keeps adding new protected areas without saying where the money is coming from."

"The National Audit Office say that Labour’s defence plans are already “unaffordable”, and Bob Ainsworth has announced defence cuts, but today Gordon Brown is promising more spending on defence. If Labour are now protecting defence spending then cuts in other departments will be more than 20%."

"Ed Balls says education spending will carry on rising, but Alistair Darling claims he has only protected “front line” schools spending."

"Peter Mandelson says you can't make cuts this year but is cutting more than £300 million from his own Department this year."

"Alistair Darling and Gordon Brown disagree over what to do if growth is stronger than expected – Darling says he wants to cut the deficit but Brown says he wants more spending."

Click here for more.

Tim Montgomerie