The snookering of Labour in a tale of two Tories

It is like the Conservatives have flicked a switch.

Today, I got invited into the Conservative war-room and they seem a pretty euphoric lot following the apparent endorsement of their National Insurance plan from Britain’s business elite – George Osborne thinks it’s a “momentous” day in the campaign.

And when I spoke to George Osborne, there was no reference to Greek-style interest rates, no reference to austerity, nothing on “the national debt is our number one priority”.

Instead “securing the recovery”, and “a Conservative government will bring hope, recovery and jobs” was the order of the day.

If you doubt this, have a look at this interview that I did with David Cameron in Davos a few weeks ago, and compare it to George Osborne today. As I said, a switch has been flicked.

I talked to City figures yesterday who were concerned about George Osborne’s seeming abandonment of fiscal hawkery on Monday. Anatole Kaletsky in The Times yesterday seems to outline this view most clearly. Bill Emmott in the Guardian today too. So business leaders may have given a thumbs-up, but not necessarily economists.

One reason why is that the £6bn of immediate cuts they are planning in non-priority areas, are going to happen regardless of whether they happen to be efficiency savings.

Listen to the Osborne interview, he is adamant that they will all be found in efficiencies, yet the NAO say that only half of Gershon’s previous government efficiency drive was actually delivered.

“I will not allow Cabinet ministers in a Conservative government to come to me with frontline cuts,” the shadow chancellor told me in response to that point, blaming Labour for the non-delivery of half of previous efficiency drives.

So where does that leave non-priority areas?

Take schools, the biggest non-Tory priority area. At 2.8 per cent cuts in the current year (the figure outlined in Conservative plans), that would for example lead to a £1.6bn cut (the IFS’s/ my calculation of what an average cut would do to that department) to the Department of Schools budget, all of it from IT and back office, apparently, and all within the year.

Actually Mr Osborne says he can’t assign numbers as to where these departmental cuts will fall, because he’s yet to see relevant government contracts, but he’s adamant that the £6bn number will be achieved.
Perhaps the most important impact is political.

In many ways the Conservatives have totally snookered Labour. For a year Cameron/Osborne have made and come off better in the argument on the debt, deficits, and the need for spending cuts. They dragged Labour, via Mandelson/Darling on to this same territory, meaning that at the pre-election budget, Gordon Brown could not offer to reduce the tax burden.

And then five days later they themselves offer lower taxes than the government, and then get cover for murky funding through endorsements from a few dozen popular business leaders.

Perhaps I’m giving too much credit for the strategic planning behind this manoeuvre. But Labour has been left beached, unsure whether to hit back against Osborne for being a closet slasher or a low credibility deficit turncoat. They surely can’t offer lower taxes themselves, can they?

• One interesting detail from the interview with George Osborne: I pressed him on why he announced £6bn spending cut, when previously said he’d decide “in conjunction with the Bank of England”. He gave an intriguing answer, including this: ‘It’s clear that the Governor has not been overly impressed by some of the things he’s heard from government on fiscal policy”.
• Politico-economic geeks can play the game of spot-the-senior Tory in the war-room behind Osborne in the interview; Gove, Coulson, etc…