Monday, January 14, 2008

Tory Spending Pledges

Let's hope they're listening

ConservativeHome has launched a campaign aimed at persuading Cameron and Osborne to beef up on public spending control.

"Last September George Osborne signed up to Labour's spending plans until 2010/11. That decision is unpopular amongst Tory members. Our monthly polling of the Conservative grassroots shows that they oppose the pledge by 64% to 24%. It's vital that Mr Osborne's pledge is not renewed as we get closer to a 2009 or 2010 General Election. George Osborne needs to allow himself more room to cut borrowing and/ or introduce economy-reviving tax relief. As it stands the Shadow Chancellor has left himself with fewer and fewer options."

Let's hope CH gets some traction on this. Given the likelihood of no election before April 2010, the pledge to match spending up to 2010-11 is fairly immaterial. But what happens thereafter is vital.

As we've blogged many times, we must get some kind of "rules based" pledge control over public spending (eg see this blog). However it's expressed (1.5% pa real growth as suggested today, or a Reform style "GDP minus x Growth Rule") we need that third Golden Rule.

As we've noted before, this is no longer some theoretical nice-to-have. Work by the OECD (among others) has clearly shown that for today's developed economies, higher public expenditure almost always means lower growth. And effective fiscal management depends on having "embedded expenditure targets"- ie clearly stated and measurable rules for cutting expenditure (eg see this OECD paper).

In the joyless jobless post-Labour environment of debt overhang, soggy house prices, and weak GDP, it won't be easy. But for the sake of future growth, it has to be gripped.