Why the Coalition shouldn't oversell the CSR

Thankfully, I wasn’t in Number Ten when the decision to invade Iraq was made. Whatever anyone thinks of the war (and we will have the report of the Chilcot Inquiry in the New Year), there is not much doubt that the process of decision making and communication leading up to the decision were deeply flawed. In particular, informed opinion and advice against the invasion was too easily dismissed, the case for the war overstated and the responsibility to develop a contingency plan for things going wrong shirked. As I have argued in the past, while these failings may be merely regrettable in the context of conventional domestic policy decisions, they are much, much more serious when facing the momentous decision to go to war.

What made me think about this again was the controversy over next week’s comprehensive spending review. I am not for a moment arguing that the detailed and nuanced decisions made in the CSR are comparable to the yes or no of going to war. Nor, even in the worst case scenario, does anyone think another economic downturn in the UK would generate the level of human suffering that has occurred since the Iraq invasion.

However, the decision to take a hard line on deficit reduction is a very big call. As far as I can tell, it is opposed by a majority of economists and if it is wrong it could significantly worsen the state of the economy and damage the livelihood of millions of people in the UK. More than that, if the economy does slump, it will be counter-productive: the lost revenues as a result of slowdown would probably be greater than the difference between the Coalition’s fast reduction approach and the last Government’s more gradual (although still very painful) plan. We could end up with deeper cuts and a bigger deficit.

Whatever my past tribal loyalties, I hope the decision turns out to be right. David Cameron, George Osborne and Nick Clegg all speak powerfully about the need to lower the deficit. As the Prime Minister said last week in his conference speech, Labour’s deficit reduction plan would mean the UK continuing to have a rising stock of debt (and rising interest payments) far into the future. That we are this year spending more on debt repayment than on the NHS is hard to stomach. But the fact remains that many serious, politically-neutral experts (for example Anatole Kaletsky in the Times this morning) say the scale of spending reduction planned could be a huge mistake.        

The understandable temptation for the Coalition facing so much opposition to its plan is both to make its case as forcefully and unconditionally as possible and to create a culture in and around Government that dares not either question the plan or explore contingencies if it doesn’t work. But this would be bad Government and bad politics. Instead, Coalition leaders should be allowing dissenting voices to be heard, showing that they know the risks they are taking and have a credible and responsible plan for changing course if things go wrong (another massive failure of the Iraq process). Chris Huhne has adopted something of this tone but he seems to be alone.

In the last few days we have seen a great deal of evidence (on house prices, on retail sales and on manufacturing output) of economic slowdown. This may not be sufficient to change the policy but must surely alter the balance of the debate. If the CSR does go wrong and there is an inquest, we will want to know that the Chancellor and his team were looking at the evidence right up to the last minute not closing their minds to uncomfortable facts.

As I say, the Prime Minister and his colleagues make a powerful economic and political case for radical deficit reduction. But even last week George Osborne was guilty of some creativity with his facts (for example, overstating the proportion of UK debt which is held abroad). These rhetorical flourishes will not look good if the policy fails and people suffer.

So, in the interest of informed and balanced public discourse (something the RSA always seeks to promote) and in the political interests of ministers making brave but risky decisions I hope the next few days will see a change of tone from ministers. Instead of trying to convince us that radical deficit reduction is right come what may we need to hear the Coalition acknowledging that the argument is finely balanced, the risks real and that there must be a plan B if a double dip looms.