Tory's savings of £35billion turn out to be £5billion!

6.00.00pm GMT Wed 26th Jan 2005

An analysis by the Liberal Democrat Treasury team has found gaping holes in Tory plans to cut £35billion from public spending.

The Liberal Democrats have identified five key points:

1.) The Tories have claimed to be able to save £35bn from "waste" in public spending, but £22bn of these savings are already in the Government's budget plans (the "Gershon" savings) and of the remaining £13.3bn of savings £8.2bn of these are not credible. So, of the claimed annual savings of £35bn, only £5.1bn are genuinely new and credible. These include cuts to the New Deal, Affordable Housing, Jobcentre Plus, and Environmental Protection.

2.) Where the Tories make "attractive" proposals to cut "waste", these proposals are incredible. Where the Tories make credible proposals to cut spending, these proposals are unattractive. Plans to cut the New Deal, Jobcentre Plus and the Social Housing budget would hit some of the most vulnerable people in Britain.

3.) The Tories plan to cut civil service jobs by some 235,000. They claim that this can be achieved without a single compulsory redundancy - this is not credible. Of these 235,000 job cuts, 80,000 are already planned by the Government, and 91,000 are transfers to the private sector. There are therefore 64,000 extra job cuts on top of Government plans (excluding private sector transfers). This implies that the core civil service headcount will fall from around 554,000 in 2004 to around 410,000 in 2007 (excluding transfers to the private sector). This would be a civil service almost 20% smaller than the Tories achieved by 1997.

4.) The Tories' largest spending commitment now appears to be their plan to pay out up to £5.9bn on redundancy payments to public sector workers. The Tories claim that selling off land and buildings can fund this.

5.) The Tories claim to be able to cut taxes by £4bn, to "change direction away from the path of …higher taxes." (Opposition Day Motion, 20/1/05). But Tory tax cuts of £4bn represent around 0.3% of GDP. Labour's published tax projections show that taxes are set to rise from 36.2% of GDP in 2004/05 to 38.4% of GDP in 2009/10. So, under Tory plans, taxes would still rise by 1.9% of GDP. Even if we assumed that the Tory £8bn for filling the "black hole" moderates the necessary tax rise, then we still arrive at a tax increase of 1.3% of GDP. However, the claimed savings are themselves deficient.

The analysis identifies large parts of the Tory plans that are either unexplained, based on overly ambitious assumptions about changing Whitehall practices or excessively generous calculations about the actual level of spending.

Nicola Davies said "The Tories have spent almost two years on the David James report in search of painless ways to square the circle between their aspiration to cut taxes and deliver decent public services. It now turns out that the vast majority of claimed Tory savings either relates to existing government plans or are based on bogus and incredible assumptions."