The PBR when government will release new figures - new to the Tories as well as to us! - is on Wednesday week.
That is when the battle for the election will start and within a short time [NOT immediately] the Tories will make a considered response.
The real argument going on now in both main parties is just how much they dare forecast ‘hard times’ without losing support! Those argiments are rehearsed below.
Christina
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SUNDAY TELEGRAPH 28.11.09
1. Alistair Darling in new clash with Gordon Brown over spending cuts
Alistair Darling will use his Pre Budget Report to paint a grim picture of severe spending cutbacks over the next four years – setting up a pre-election clash with Gordon Brown.
By Patrick Hennessy, Political Editor
Treasury sources told The Sunday Telegraph that the Chancellor's speech on December 9 would go much further than simply outlining Whitehall "efficiency savings" worth billions of pounds from next year.
Mr Darling, they said, was determined to leave voters in no doubt over the "tough choices" that needed to be taken as the government strives to hit its target of halving Britain's soaring public deficit over the next four years.
The Prime Minister, by contrast, is keen to approach the next election – which must be held by next June – by stressing Labour's plans to carry on spending on schools, hospitals and other "front-line services".
The fresh evidence of tension between 10 Downing Street and The Treasury came as the Tories produced a leaked Whitehall document showing, they claimed, that ministers were in "chaos" as they planned efficiency savings.
The leaked draft of the "Smarter Government" paper suggests ministers are planning to cull senior civil servants and cut funding for quangos and other "arms length bodies" – but leaves gaps where exact figures will be published.
The Sunday Telegraph has learned that the key difference between Mr Darling and Mr Brown is over how upfront ministers should be with voters in the run-up to polling day – with next week's Pre Budget Report (PBR), the Budget proper in the spring and Labour's manifesto as the key staging posts.
Mr Brown and his cabinet allies, who include Ed Balls, the Schools Secretary, want the main message to be that Labour will continue to spend more than the Tories, particularly on front-line areas close to voters' hearts such as education and the NHS.
However, a Treasury insider said: "If, over the next six months, the only thing you put forward is efficiency savings, then you will have a big credibility problem."
He said the Chancellor would stress in the PBR that while spending would continue to rise in real terms between 2011 and 2014, this would be a period of serious retrenchment and that several long-term government projects would either be scaled back or shelved.
Mr Darling is also expected to use the PBR to downgrade growth forecasts and to confirm that VAT – which was cut to 15 per cent last year – will go back up to 17.5 per cent on 1 January.
George Osborne, the shadow chancellor, has proposed an austerity package including a pay freeze for public sector workers in 2011 – except front line military or people on less than £18,000 – no more tax credits for families earning over £50,000 and a crackdown on Whitehall salaries.
The leaked "Smarter Government" draft – a document produced for Mr Brown by Liam Byrne, the Treasury chief secretary – suggests that "bringing procurement and back-office standards up to the very best could release £9 billion per annum by 2013/14."
It plans to reduce the number of senior civil servants, currently 4,300 by 10 per cent but leaves blank the amount of money this would save.
The document also refers to "modernising working practices and the way we locate the business of government" – thought to be a reference to plans to transfer thousands of civil servants out of London.
Philip Hammond, the shadow Treasury chief secretary, who last week claimed Labour had wasted £60 billion of missed efficiency savings during their 12 years in power, said: "The details of this leaked document reveal that Labour have been going in the wrong direction over the last twelve years, with the document cataloguing the extent of their failure in Government.
"The Conservatives have put a figure on Labour's failure to deliver efficiency in public spending at £60 billion per year. We had been told to expect great things from this review, but if this empty document is the best that Labour can do then a change of Government can't come soon enough."
A Tory source said: "The Treasury is clearly in chaos as it approaches the PBR." The final document is expected to be published this week.
2. Tories should maintain hardline on UK economy
For several months now, the Conservatives have talked tough, inching towards a policy stance reflecting the UK's desperate fiscal situation.
By Liam Halligan
Over the last week, though, has the UK's government-in-waiting lost its nerve?
A rogue opinion poll, commissioned by a Labour-supporting newspaper, suggested the Tories would prevail by only 6 percentage points at the upcoming general election. That was sharply at odds with all other recent polls. Party strategists still blamed this narrowing on "austerity rhetoric", given that senior Tories have lately had the guts (and decency) to admit the next few years will be tough.
The UK borrowed £11.4bn in October. Over-reliance on financial services and the housing market meant revenues were 9.1pc lower than the same month a year ago. Expenditure, meanwhile, was 10.3pc higher.
This country will run a budget deficit equal to 13.2pc of GDP next year – the biggest fiscal shortfall of any major economy in the world and the biggest in our peacetime history. The Government will borrow £200bn annually for at least the next three years, the UK's national debt ballooning from 44pc of GDP to more than 100pc by 2014.
The Tories recently outlined plans to save £7bn a year by 2013 – a response this column described as "tackling a fiscal inferno with a half-empty water-pistol". Yet, it wasn't long ago the UK's main parties were competing on the basis of "who can spend more". The opposition front-bench, in particular shadow chancellor George Osborne, deserves credit for shifting the debate to "who can spend less", which is where it must be, given our fiscal predicament.
In recent days, though, I detect slippage. Amidst ridiculous talk of Gordon Brown's "resurgence", the Tories now say they're "going for growth". In the absence of detailed policies, one can only guess what that means. I worry the Conservative leadership is having second thoughts, yielding to the siren calls of the economic illiterates subscribing to Brown's solution of flabby, Keynesian spending as far as the eye can see.
The UK must retrench its national accounts. If that doesn't happen soon, the gilts market may prevent the country from rolling-over its debt – a disastrous outcome that would see borrowing costs soar.
Softer Conservative rhetoric could actually increase the chances of a gilts strike, given that investors are trying to judge what the next government will do. This is no political parlour game. The Tory leadership is playing with fire.
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• Liam Halligan is chief economist at Prosperity Capital Management
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