Terry Smith, chief executive of Tullett Prebon, was among those making the case this evening for bigger, deeper cuts at a fringe event. The businessman called for a Plan B: not the “Keynesian stance of Ed Balls” but something else: “Deeper cuts, or, real cuts, we haven’t really had any cuts so far.”
Clearly this would not be music to the ears of the left; but then Smith estimates that Britain’s real debt (including pension liabilities, PFI commitments, bank guarantees etc) is about £3.6 trillion – or £60,000 per capita.
He warned that the biggest areas of public employment – public sector, housing and finance – were unlikely to experience growth in the near future. Cuts were inevitable: “It’s only a question of when the markets will impose them.”
His counter-intuitive theory is that banks don’t have enough capital to lend because people will not deposit money with them when interest rates are so low.
“We need real cuts and deeper cuts and higher interest rates even where there may be interesting side effects.”
Fraser Nelson, editor of the Spectator, made an articulate case that the current cuts are less austere than ministers claim. He pointed out that spending is only falling by 1 per cent a year – compared to Darling’s plan to freeze spending. (Of course this ignores the reality that in real terms the departmental cuts are much deeper and will cause serious pain. UPDATE: Here is a full explanation).
Andrew Tyrie, chair of the Treasury select committee, stayed broadly loyal to the government course, perhaps reflecting his ticking-off by Craig Oliver, Downing St head of comms, after speaking out against the government at the weekend.
So it was left to John Redwood to argue that the next five years will see extra borrowing of £480bn – more than the entire debt accumulated by Britain in the centuries leading up to 2003.
Redwood argued for a (temporary) cut in the aid budget so it is no longer ring-fenced from the squeeze. He also argued a more effective pay freeze in the public sector.
Yet even among these fiscal hawks there were few easy hits, no clearly argued set of measures which could be taken to slash public sector even further without an obvious impact on the frontline. That is striking in itself.