Another threat to the deficit target: Tory MPs

A couple of people asked me, earlier this week, what the hell was happening with welfare cuts. Are they on? Are they off? What does no more cuts really mean? I was as clueless as the next man, though, which is hardly surprising given that several different messages were coming from our governing party. At one point I wondered if even George Osborne knew what was going on.

As Patrick Butler explains, when the government says no more cuts, it means no more cuts other than the ones it has already planned. Even then, says Tony Wilson, if the welfare cap is breached in one area, the Treasury will look for more cuts in others to compensate. In other words, no more cuts means no more than the £12.8 billion we have already said we will make.

This should come as no surprise. No more welfare cuts, in the sense that many people have probably understood it, would mean the deficit reduction plan would be in ruins. In this parliament, cuts to social security play a far bigger part in the government’s plans to reduce borrowing than they did in the last one.

Screen Shot 2015-11-26 at 16.53.08

Chart via FT

Furthermore, since this chart was done in the autumn, the OBR has cut its forecast for tax receipts. If they are right that leaves another £56 billion to find. Take out that dark blue block of welfare cuts and the whole thing falls apart.

All of which makes the noisy opposition to disability benefit cuts by some Conservative MPs a bit disingenuous. The party’s flagship policy, and the stick with which it has very effectively beaten Labour, is debt reduction. If you were elected on a Conservative slate you must, therefore, either support cutting welfare, cutting public services or increasing taxes. The deficit cannot be eliminated without some combination of the three.

The trouble is, the folklore around welfare says that there is an army of scroungers out there leeching of everyone else. Many MPs, despite having lots of clever people to brief them with the facts, still seem to believe this. But, if ever there were lots of work-shy layabouts, there certainly aren’t now. These days, people on benefits are more likely to be in work, retired or disabled than unemployed. It’s easy for newspapers to come up with anecdotes about scroungers but there are not that many of them. There are certainly not £12 billion worth.

This graphic from the IFS last year neatly illustrates the problem. Reducing welfare costs by £12 billion means taking a big slice out of the benefits paid to the disabled and those in low-paid work.

Screen Shot 2015-05-28 at 12.47.07

To take £12 billion off the welfare budget, then, will inevitably hit people who a number of Conservative MPs think of as the deserving poor. Whether they are the elderly, the low paid on tax credits or people with disabilities, there will be vocal opposition to cutting their benefits.

Regular readers of this blog will know that I have never believed the government could make £12 billion worth of welfare cuts. The events of the last week  show that while many Conservatives might support welfare cuts in the abstract, they don’t like the reality. Since that IFS chart was published, David Cameron has already ruled out cuts to child benefit. The tax credit cuts have been kicked down the road for now but when they reappear in a different form there will be another row. When it becomes clear that the National Living Wage isn’t offsetting benefit cuts, some Tory MPs will start making noises about that too.

As Steve Richards remarked, Conservative MPs support public spending cuts while opposing nearly all attempts to cut public spending. It is probably infuriating for George Osborne but if (or more likely when) he misses his 2020 deficit target, his own MPs will have played a big part in knocking him off course.

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One Response to Another threat to the deficit target: Tory MPs

  1. sdbast says:

    Reblogged this on sdbast.

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