As the Labour government is left reeling by four Cabinet resignations and a European and local election defeat, the talk of the town is no longer whether Labour can make a comeback but rather, what will the Conservatives actually do if or when they win the next General Election?

This week’s knowledgeshop briefing will take at look how a Conservative government would reduce the country’s burgeoning levels of debt. David Cameron told the Tory spring conference in Cheltenham at the end of April that he would usher in an ‘age of austerity’ to overcome the current crisis. He warned that “unless we deal with this debt crisis, we risk becoming once again the sick man of Europe.” Cutting through the Cameron rhetoric, this briefing analyses prospective cuts to departmental budgets, as well as the savings the Conservatives will look to make by scrapping costly projects, such as the ID cards scheme.

Reform, a think-tank with strong ties to the Conservative Party, recently published a Budget paper ‘Back to Black’, which argued that public spending cuts must be considered in traditionally “unthinkable” areas such as the NHS and defence. Although the NHS ‘Connecting for Health’ IT system is likely to be scrapped, saving an estimated £12.4bn, Andrew Lansley, Shadow Health Secretary has claimed that the Conservatives will not cut the NHS budget, preferring instead to make ‘efficiencies’. Philip Hammond, the Shadow Chief Secretary, suggests that a Tory government would aim to almost halve Britain’s debt to below 40 per cent of the national wealth.

Red tape, quangos and consultants

On day number one of a Conservative government the first targets for savings would certainly include reducing costly regulation and other red tape. The work of the Department for Business and regulatory Reform would be reviewed, with Cameron promising to remove two pieces of regulation for every new one put in place. Regional development and planning agencies would fall victim to the chop, as well as the removal of £1 billion plus costs incurred by overhead monitoring of local government from Whitehall

Earlier in the year David Cameron told the Financial Times that he would reduce the number of MPs by more than 60. Not only could this redraw Britain’s parliamentary map to make it easier for the Conservatives to win future elections, but would also be a populist move in light of the expenses scandal. That could see the number of seats in Wales cut from 40 to nearer 30 and the reduction of small inner city constituencies in places such as Liverpool, reflecting the shift in population to the Tory suburbs. In addition, the number of Special Advisers will be reduced. In the aftermath of the Damien MacBride scandal, the Conservatives have called for a reduction in the use of external consultants and advisers. This will require further transparency around the hiring of consultancies by ‘government to lobby government’. Francis Maude has attacked the Labour government for “burning taxpayers’ money” after it was revealed that the government was tendering a £4 billion contract for management consultants. Total public sector spending on consultants for 2005-06 was estimated at around £2.8 billion. Although the Labour government has successfully reduced those costs, it is expected that the Conservatives would go much further on a politically easy target.

The Conservative Party’s distaste for the plethora of ‘quangos’ (Non-Departmental Public Bodies) established under the Labour government is no secret.  According to the Taxpayers’ Alliance there are 1,162 quangos, spending a total of £64bn. Amongst the quangos that face certain extinction under a Conservative government are the newly created Infrastructure and Planning Commission. Nevertheless, most quangos will more than likely remain in place during a first term, albeit suffering severe cuts in funding. The Conservatives have pledged to reduce the number of civil servants by freezing recruitment and reducing public sector pay. Cameron has stated that a progressive Conservative approach means calling time on the culture of quango fat cats “getting rich at the taxpayer’s expense”.  This means first publishing details of all civil servant salaries over £150,000, with the highest paid having their pay frozen. Osborne has claimed that any quango boss earning more than the prime minister would have to justify their salary to the Treasury.

George Osborne has also stated that the issue of “gold-plated” public sector pensions would be addressed swiftly when they come to power. “Public sector pensions need to be reformed,” Mr Osborne said. The CBI has warned that Britain’s public sector pensions bill is approaching £915bn and is ’set to get much worse’. Firing civil servants would be politically unsavoury within the context of the current recession but a freeze on current pension increases are a near certainty. “We are not bound by the deal done between Labour and the unions.”  Osborne argued.

Welfare system

Cameron’s team intend to seriously overhaul the tax credit system. The Party leader claimed that the original purpose of the system had been “confused to the point where tax credits can now reach people earning over £50,000 a year”. Full scale reform of the tax system is a certainty and if the Conservatives canresist the pressure to redistribute, savings in tax credits could be as high as £2 billion. The coffers would be further boosted by plans to cut £200m each year from the budget of Sure Start, an initiative to support poorer families ‘close the gap’, .£79 million in funding for Sure Start outreach workers and a further £121 million from core Sure Start budgets.

Education, Skills and Training

There is likely to be a heavy shake-up of spending on schools with the party suggesting that it would reallocate some of the money from the £45bn Building Schools for the Future (BSF) programme to a new capital fund for academies. Nick Gibb, Shadow Minister for Schools said “The Budget was a shock. With that level of debt there will need to be significant savings – and it is not clear where they will come from.” This has ominous implications for the capital expenditure programme with some suggesting that there will be a reduction in the number of schools built or refurbished under BSF. Mr Gibbs said: “There is lots of waste in the state sector, and I’m determined to deal with that.

Another victim of Conservative cuts could be Train to Gain, an employer led vocational training programme. Cameron has called for a ‘revolution’ in’ archaic’ skills provision and it is believed that by saving 1 billion pounds on Train to Gain, the Conservatives could deliver a cheaper and more efficient apprenticeships scheme. However, slashing the skills and training budget are unlikely to happen until the economy recovers.

ID Cards

“We will scrap the ID cards scheme” David Cameron stated on his website. However, a complete abandonment of the scheme may not in fact be on the cards. The ID cards project breaks down into three separate projects – a Biometric Identity Card, a Biometric Passport and a National Identity Register. While Cameron was referring to the biometric identity card, Chris Grayling, the Shadow Home Secretary recently said that the Conservatives would “continue with the introduction of biometric passports”. The passport scheme relies on a similarly expensive system. Thus, the savings may not be as grand as originally thought, particularly in light of the compensation they would be required to be paid out to contractors. Nevertheless, at a whopping cost of £5 billion to the taxpayer, any cuts in the project would help reduce the country’s long-term debt.

Crossrail

In early May Yvette Cooper, the chief secretary to the Treasury, challenged Phil Hammond, her opposite number, to commit a future Tory government to the £16bn Crossrail programme. Since Hammond replied that “every single programme, every single project will have to be reassessed and re-evaluated” the media has speculated that Crossrail could fall victim. London mayor Boris Johnson claims to have been assured by Cameron’s team that the project would continue under a Conservative government. However, given its scale, and therefore the amount of money that could be saved, there is growing possibility that the project could be frozen, just like it was after the recession of the early nineties – four years after the Conservative government  gave it approval.

Defence

Although the Conservatives have repeatedly criticised the government for underfunding the overstretched armed forces, some reports indicated that the Ministry of Defence may well bear the brunt of David Cameron’s “era of austerity”, should the Tories enter office. A report in the Times suggested that the Shadow Defence Secretary Dr Liam Fox and the Shadow Chancellor George Osborne had discussed plans to cut the defence budget, an allegation the formers office swiftly denied. It was alleged that as part of a government efficiency drive, a Conservative government would seek to slash around £3bn from the defence budget, with the Future Strategic Tanker Aircraft and the A400M being the most likely casualties. Scaling back the ambitious Trident project could be a politically easier move to make, in light of the agreement made by the U.S. and Russia to restart nuclear arms reduction talks. Ken Clarke, the shadow business secretary, confirmed that Trident was among the schemes which would be considered if the Conservatives won the next election, “We are in favour of the replacement of the nuclear deterrent, we voted for it in Parliament. But like all other projects that we have, we have to review them for value for money for the taxpayer.” The most likely outcome is that orders for new trident submarines will be reduced to 3 or 4.

The challenge ahead

There are some tough choices ahead for David Cameron and George Osborne. It is believed that a 10% cut in education, defence, home office and transport spending will be needed to have any chance of getting Britain back to black. Like other areas of policy, the Conservatives are keeping their cards close to their chest. With public opinion firmly against the current levels of national debt, the Conservatives may have a near unprecedented opportunity to implement their programme of cuts. But as the economy starts to recovery, they will have to be smart about their targets.