Fasten your belts for the CSR

The Comprehensive Spending Review (CSR) has confirmed much of what we already knew about George Osborne and his cronies.  Whilst the newspapers gave us their traditional tunes, the analysis from independent think tanks has been comprehensive.  Phillip Hammond, the Transport Minister and smoothest of cabinet communicators, was put up on Question Time and was forensically dismembered by Caroline Lucas, leader of the Green Party, Polly Toynbee and some very savvy members of the audience.  It is now game on.

We all realise that the deficit must be reduced and that this will require some significant reduction in public expenditure but what George Osborne has proposed will have devastating consequences not only on students, the young unemployed, those on housing benefit but also mothers who do not work and many people enjoying what are widely acknowledged as very good health services at present.  Beneath or lost in all the coalition posturing about fairness are four fundamental contradictions of policy direction. These will be at the heart of political debate over the next four years.


The first contradiction is about Economic Activity.  There will be a sharp increase in the length of working life of people. This follows a steady decline in the working life in the post war period as the school leaving age was raised from 14 to 16 and people retired earlier.  In future as a result of the CSR and its implementation there will be fewer young people going to University or Further Education at one end of the working life and people, but women in particular, will need to work longer as the pension age rises to 66.  The employed will need to make pension contributions for a longer period and redress the pension fund deficits in both the public and private sectors.  But at the same time up to 500,000 public sector workers will be laid off, many on early retirement which will require organisations to divert scarce resources to prop up pension funds instead of delivering services.   And there could be an equally large number of job losses in the private sector as public sector capital spending is reduced by a third and there is far less contracted work in everything from home care and nursing to IT and construction.   More people need to work longer but less work is available.

The second contradiction stems from the artificial construct of public and private sector enmity which the coalition and parts of the press are eager to perpetuate.  We need to work together,  The cutting of legal aid today will damage the poor but also take out £300m from the law profession, which is not a bad thing in itself but it is an own goal against the private sector. If the public sector spends 43% of the GDP and employs only 5million or 16% of the workforce the majority of public spending must support the private sector - construction, consultants, security, IT, catering, agency staff etc.  These are all far more vulnerable to cuts by councils, the NHS, government agencies and quangos than teachers, police, social workers, nurses and doctors to name but some frontline services. The private sector will be equally damaged by the public expenditure cuts and unable to fill the jobs gap.

The third contradiction concerns consumer expenditure. If there are wage freezes, a requirement to invest more on pensions, an increase in VAT, rapidly increasing fuel and food costs then there is less for households to spend on the extras in life like holidays, meals out, leisure activities, home improvements and private education, university tuition, health and community care.  Surely this will prevent the compensating growth in these sectors of the economy which will add to the hefty reductions earmarked for defence spending, construction projects, arts, culture and sport. There will be a tightening of consumer spending with consequences for many private service industries including those in education and health.

The fourth contradiction  is the assault on mutual respect which is at the heart of good governance.  Governments are never popular, although Blair achieved it for a time between 1997 and 2000 by tuning into the public's aspirations for quality and choice.  Tough decisions are accepted as part of the deal on democracy that underpins society but they require a semblence of justice and an understanding by government that there are limits to the scale of change that will be accepted.  By upsetting the police, the armed forces, the health and education sectors as well as squeezing the poor the coalition is removing the carapace of protection that it needs to survive.  Small businesses are already fearing the backlash of VAT rises and dodgy order books and big business is making the usual threats to bale out unless their profits and bonuses are allowed to continue.  The government will have as enemies all those who stand to lose out by its changes and these are looking like a substantial majority.

These contradictions may not all arise but it seems to me that sufficient of them will and the coalition will need to turn if it wants to see out the next four years.