Until today, the Conservatives had made a great priority of the need for deep and quick cuts to the deficit, indeed they plan to cut more deeply and more quickly than many economists and the IMF think is wise. Now they have announced that they would only partially implement the proposed 1p NI increase. This is a traditional Tory tax-cutting move if not an open bribe, and the opposite of deficit cutting: it will increase any deficit calculation. So, whither cutting the deficit? Has the Tory strategy changed? Are we back in buying votes mode?
Tories are claiming that this produces "clear blue water" between the main parties. Now, I'm no economist, and Faisal Islam has a good analysis on his blog, but it seems to me that Osborne has made, if not a U-Turn, at least a right-turn off the previously mapped out Tory highway.
The claim is being made that seven out of ten workers would be better off if Osborne's move is implemented, but that seems to ignore a number of factors.
1. The move will cost £5billion, and that money has to be found somewhere. The most likely target will be public sector jobs and wages. So, if you are a doctor or nurse or teacher and you find yourself out of work, or has your contract hours cut, or suffers a wage freeze, would you be "better off"? Probably not.
2. If the real need, as the Conservatives have told us constantly and insistently, is to cut the deficit deeply and quickly, then there will be adverse effects to the recovery. And if the recovery is delayed or goes into a "double dip", will seven out of ten be better off? Seems unlikely.
Another issue that Faisal Islam touches on is credibility: not just with the public, who will see this as a u-turn but still might buy the bribe, but with the markets. A lot of Tory confidence has been in the belief that the markets would welcome, or at least not oppose, a Tory government. But if the Conservatives are so willing to abandon a long-held strategy for a few headlines and a tax bribe, what then? Will they be willing to give the Tories support, grudging or otherwise, now?
And if not, could Osborne's tax U-Turn be a turning point in the election, even before the campaign is under way?
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