The incredible shrinking state?

George Osborne got a bit ratty with the BBC this morning in his interview on the Today programme. He attacked the BBC’s coverage of future projected cuts as “nonsense” and “totally hyperbolic.” He accused the BBC of “attacking welfare savings” in the past and generally seemed a bit jumpy about the coverage of cuts (a political worry if it plays into “nasty party” Tory perceptions).

But how does the government get the state’s share of GDP down to 35 per cent as projected by the OBR without getting a bit “nasty?” Are there secret big strategic saving plans being cooked up?

George Osborne emphasises that his track record achieving cuts in this parliament gives him credibility to reach targets in the next.

But the next round if savings won’t be achieved by a round robin letter to departments asking for offerings. It’ll take more strategic or drastic approaches if you hold to the 35 per cent number.

The document on efficiency savings published alongside the Autumn Statement yesterday is 29 pages long and spends the first 19 pages talking about achievements in this parliament. It then talks about more digital services, more land sales and better procurement practice.

But as former Treasury official Emran Mian, now head of the Social Market Foundation, told me, that’s not going to get you to 35 per cent.

You need something more drastic like co-payments, a big move to the contributory principle in welfare, the axing of whole government activities.

The worry amongst various economic think tanks I spoke to this morning is that the government has no secret plan to get to 35 per cent.

One long-serving Whitehall official said he feared it would be like the PM’s strategy on Europe and renegotiation – you name your destination then “improvise and make it up on the hoof.”

Many old Labour hands were struck by the Gordon Brown-like structure of George Osborne’s statement yesterday. But the political missions are mirror images of each other.

If Gordon Brown was on a “redistribution by stealth” project throughout his chancellorship you could argue that George Osborne is on a “smaller state by stealth” project.

Various bits of chaff are thrown up by both masters of the budget/statement art, but behind the scenes the broader political project grinds on.

It’s possible that miracle growth saves the day, possible too that George Osborne trims the surplus targets and we don’t go anywhere near a “35 per cent state.”

But the Treasury will prepare plans for a “35 per cent state,” one old Treasury hand says, and a lot of the options work could well be done in the quiet days of April 2015 when the politicians are out of the building campaigning.

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