What does “too far, too fast” mean?

What is the difference between Labour’s plan to cut the deficit and the Coalition plan?

Two nuggets prompted this. One was George Osborne’s assertion that the Labour plan set out by Alistair Darling before the election was for spending cuts only £2bn smaller than the £16bn he was proposing for this fiscal year, 2011-12.

The other was Boris Johnson’s claim, in his mischievous article in yesterday’s Telegraph (which succeeded in winding up Ed Miliband and drawing attention to his misjudgement in addressing the March for the Alternative), that Labour planned to make 80 per cent of the spending cuts in the Government’s plan.

Labour always sounds as if its message is, “We want to do half as much as the Tories,” when in fact there is less difference between the two. But how much less?

We know that the parties’ plans were not directly comparable. Labour promised to halve the deficit in four years, while the Conservatives want to eliminate the structural deficit in five. So, different time periods and different bases.

The structural deficit in the last year of the Labour government (2009-10) was 69 per cent of the total (the other 31 per cent being “cyclical” – that part of the deficit that would be expected to close as a result of the return of growth, the economic cycle).* Thus the Tories want to cut the deficit by 69 per cent in five years; Labour wanted to cut by 50 per cent in four. Assuming the Labour plans went on at the same rate, that would mean 62.5 per cent in five years. But [2nd update, just worked out how this works] because the Labour cuts start a year later, the cumulative total after four years is a lot lower under the Labour path than the Tory one.

Which is why, if you look at the Budget Red Book, table 1.1 (below), the difference between “policy inherited by the Government” and the policy it is now carrying out (“total discretionary consolidation”) is so great.

Osborne is right that the gap in spending cuts next year (2011-12, starting next week) is small. For some reason, Darling’s cuts were concentrated then. The difference is indeed between Darling’s £14bn and Osborne’s £16bn. (Thanks to Pilsden in the comments for pointing out that the £16bn is derived from the £22bn figure in the table, which includes the £5.5bn, rounded to £6bn, recurring from the previous year.)

But the cumulative total of planned spending cuts inherited from Darling, to which Boris Johnson seems to be referring, amounts to 63 per cent, not 80 per cent, of the total now planned.

If anyone with a head for numbers can explain from where Johnson gets his figure, I am certain that a grateful nation awaits.

*The March 2010 Budget Red Book (pdf), Table 1.1, cyclically-adjusted PSNB (public sector net borrowing) 2009-10: 8.1 per cent of GDP of total PSNB of 11.8 per cent.

Photo: Peter Macdiarmid/Getty Images

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• JohnSzepietowski

  The more unemployed… The more we borrow..

  This is precisely the problem!

  John Szepietowski

• JohnSzepietowski

  They certainly support it 30% less than they did!

  John Szepietowski

• JohnSzepietowski

  Sir, you’ve hit the nail, precisely on the ‘ed!

  John Szepietowski

• JohnSzepietowski

  Surly the Labour plan was to cut OVER 5 years but delaying for a year to allow the country to recover more?

  John Szepietowski

• JohnSzepietowski

  You say tomato, I say tomato….

  John Szepietowski

• David_Gould

  I guess you missed the point of this article. Politicians lie…

  Please don’t repeat their propaganda in public. It only serves to distract from the real debate.

  The NHS reforms have absolutely nothing to do with privatisation. Who the hell would buy it?

  What they are about is removing control from the health quangos and giving it to GPs. How this will work in practice is where the debate should be.

  It’s half of the Dutch model. The NHS is becoming organised around co-ops who are both accountable to the public and free to commission as they feel is best for patients.

  But it’s also lacking the Dutch divide between insurers/commissioners and health providors (and obviously the multi-level insurance premiums).

  Can’t find a good diagrammatical explanation but this Civitas PDF isn’t bad.
  http://www.civitas.org.uk/nhs/download/netherlands.pdf

• David_Gould

  I guess you missed the point of this article. Politicians lie…

  Please don’t repeat their propaganda in public. It only serves to distract from the real debate.

  The NHS reforms have absolutely nothing to do with privatisation. Who the hell would buy it?

  What they are about is removing control from the health quangos and giving it to GPs. How this will work in practice is where the debate should be.

  It’s half of the Dutch model. The NHS is becoming organised around co-ops who are both accountable to the public and free to commission as they feel is best for patients.

  But it’s also lacking the Dutch divide between insurers/commissioners and health providors (and obviously the multi-level insurance premiums).

  Can’t find a good diagrammatical explanation but this Civitas PDF isn’t bad.
  http://www.civitas.org.uk/nhs/download/netherlands.pdf