Bernard Ingham: After Labour largesse, we must return to realms of sanity

ONE of the great Leftie myths about that Bold Slasher called Margaret Thatcher is that she took an axe to public spending. This is pure Mandelsonian codswallop – as I noted in 1991 in my book Kill the Messenger.

"Mrs Thatcher's signal contribution to the management of Britain's finances was to control, as distinct from cut, public spending", I wrote. "This was a formidable achievement... but it meant that over

time the government was spending more, not less, of our hard earned cash. She 'cut' public expenditure as a proportion of the nation's

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total income but because that income was growing she spent more".

All this led me to redefine a cut as to mean "not an actual reduction in expenditure but something less than... demanded, desired or

arbitrarily thought necessary". History will repeat itself with today's public expenditure statement. It has been quietly pointed out that at the end of this Parliament the coalition will be spending a bit more than Gordon Brown at his worst while at the same time going a long way towards eliminating the 156bn budget deficit. This will be achieved by re-ordering priorities within total expenditure, slashing some parts of it, and raising taxes. Never forget the 2.5 per cent increase to 20 per cent in VAT from January.

I do not expect Chancellor George Osborne to clarify things much this afternoon. After all, he has so many different audiences to play to. Above all, he wants to be seen as Prudence Personified by the world's investors who keep us afloat. He also wants politically to underline Labour's vast reckless profligacy, especially over its later years.

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He probably does not mind too much – at least at this stage – being seen to squeeze the middle classes if it serves the great Cameronian mission of injecting a stiff dose of social conscience into the Tories' rehabilitation. This is perhaps underlined by the amazing mess over the presentation of child benefit reform.

In any case, squeezing Ed Miliband's "middle" helps to soothe the

savage crypto-socialist breasts of Liberal Democrats such as Charles Kennedy and Simon Hughes, not to mention Vince Cable.

Amid this welter of conflicting objectives – and Labour's pitiful

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denial of unsustainable public debt – the first casualty is truth. It was ever thus.

Indeed, if the coalition's aim has been to confuse us all, it has done a brilliant job. It has been ignobly assisted by the semi-public war between the Treasury and departments in which the Ministry of Defence, this time with Afghanistan as a useful bargaining counter, has played, as ever, a leading role.

The 1001 vested interests who have been stuffing us with tales of Armageddon descending on this sceptred isle around lunchtime today have also given the helpful impression of governmental financial rigour.

However, on the basis of my experience across a turbulent earlier decade of public spending rounds, I can confidently predict that, dire though Labour's legacy may be, things will not be as bad as they seem now. It is an old Treasury trick to exaggerate spending cuts (or underplay tax reductions) in advance so that people feel better on the day.

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This is not to make light of the tragedy for those who will lose their jobs as a result of today's handiwork or of the bigger tax burden that will fall on everyone.

It is just to state a simple fact: fierce though the "cuts" can be made to appear, they are, in fact, reductions in what Labour extravagantly planned rather than slashing the money actually spent.

It is crucially important that Labour's largesse is cut back. It is absolutely vital that the public finances return to the realms of sanity – ie eventually to below 40 per cent of GDP – and kept there. The sooner all that is done, the quicker growth will provide more jobs and tax revenue and room for that curious winning combination: buoyant public spending and lower tax rates.

Mr Osborne is playing a long game. If he gets it approximately right today – and if the Liberal Democrats maintain their stomach for the tough game of government – stand by for a bit of jam on your bread and butter by 2015, just in time for the next election.

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Cameron will be a hero. Nick Clegg will have proved the Liberal Democrats can act in the national interest when faced with the challenge. And the Government will (sustainably) be spending more not less of our money.

Like Thatcher, they will also greatly complicate British politics.