Very near the beginning of his speech introducing the comprehensive spending review, George Osborne attempted to frame the exercise in the simplest of terms: “We are going to ensure, like every solvent household in the country, that what we buy we can afford; that the bills we incur we have the income to meet.” Either you accept the chancellor’s analogy or you do not. I do not. Of course the deficit matters. But it should be a policy variable rather than targeted to meet a dim accountant’s idea of balance.
The number of international authorities the chancellor selectively quoted in support of his view does not make it valid. “Selectively”, because the International Monetary Fund, for instance, which he cited, is obviously split. All the chancellor needed to do was to fill in the detail of his predecessor Alistair Darling’s project to cut the deficit by half over five years, which the latter was not allowed to give for political reasons, with the addition of provisions for flexibility in either direction.
I do not agree with some of my media colleagues that this is the biggest economic policy shift since Henry VIII’s Dissolution of the Monasteries. As the Centre for Economics and Business Research, among other analysts, has pointed out, even if the government succeeds in reducing managed public expenditure from its current level of 48 per cent of gross domestic product to just under 40 per cent by 2015-16, this still leaves the ratio higher than in the early years of the recent Labour government. The projected cut is much less steep than the 3.9 percentage point cut in a single year, 1977-78, after a Labour chancellor, Denis Healey, applied to the IMF.