ANALYSIS:As the impact of deep cuts begins to sink in, the Tory/Lib Dem union may soon find its luck is running out
IN HIS new year message to the British public, David Cameron warned that 2011 would be a difficult year.
For his new year celebrations, chancellor of the exchequer George Osborne went to Klosters, the Swiss ski resort for the very rich.
Osborne, undoubtedly, will need the rest. Up to now, the British have largely talked and worried about the impact of spending cuts, rather than felt their actual effects.
This will change fundamentally for many, if by no means all, in the coming 12 months.
Cursed by the December weather, British high-street shopping chains made good some of the losses in recent days as shoppers responded to advertising campaigns to buy before the standard rate of VAT went up yesterday from 17.5 per cent to 20 per cent – one of Osborne’s key measures to increase tax revenues.
Labour leader Ed Miliband warned the 2.5 per cent rise would devastate the retail trade and discriminate unfairly against the poor, while others said it would add further fuel to inflation as retailers try to hide their own price increases in its coat-tails.
Up to now, however, the doomsayers have been wrong about the effects of the Conservative/Liberal Democrat coalition’s actions: Labour said the first £6 billion worth of cuts in May would cause widespread chaos. Few now could remember even what they were.
A double-dip recession did not materialise, while most economists predict that the UK economy will grow by 2 per cent this year – unspectacular and not enough, and the benefits will not be shared equally, with London striding ahead and everywhere else lagging behind.
The coalition has spent much of the last few months talking about making spending cuts as it laid waste to a whole series of government-created quangos. The announcements produced a lot of favourable press, but saving money will prove to be altogether harder.
So far, the decision to increase tuition fees – even if backed by a state loan to pay for them – has proved to be the most politically damaging, along with the cuts in an allowance that encourages children from poorer backgrounds to stay in school.
Tens of thousands have already taken to the streets, testing police resources and showing that protests organised on social networks such as Twitter and Facebook require no hierarchy and defy prediction.
The tuition fees changes are important not just for their costs, but also for the fact that they will only affect English students, since those coming from Scotland, Wales and Northern Ireland will continue to be funded by their local administrations. Such perceived unfairness will rankle in time.
So far, the UK has not descended into a 1979-style strike spree: the RMT (Rail, Transport and Maritime) union has deliberately squeezed London Underground commuters, but the Tube drivers are viewed as self-serving, if powerful and led by a demagogic trades unionist.
However, this could change once the impact of the cuts is felt in schools, hospitals and libraries.
Local government managers, unwilling or unable to enforce the reforms demanded by Whitehall, will have reason to target highly-visible cutbacks. For now, trade unionists and Labour politicians have looked on with keen interest at the students’ protests, seeing opportunities in the fact that the younger generation has become politicised in a way not seen, perhaps, since the early 1970s.
However, such protests contain dangers.
Some of the violence that surrounded the November protests – even if both the violence and the police reaction to it were exaggerated – was orchestrated by far-left elements.
The Trades Union Congress is promising a monster rally in Hyde Park at the end of March to protest against the spending cuts. Already some say that it could be the biggest demonstration seen in London since the million-strong rally against the Iraq war, if not bigger.
Cameron and Osborne, therefore, will regard themselves as fortunate if they get through 2011 in one piece, since the year will be marked by higher taxes, higher mortgages, stubbornly high inflation, along with the effects of spending cuts.
A number of ifs then come into play: will the United States economy continue to improve? Will the euro stay out of the disaster zone? And can the UK finally start to make serious ground exporting to China, India and elsewhere?
Since May, Cameron and Osborne have insisted that public service cuts will be replaced by private sector growth. This did happen in the last quarter, but they will need this to happen again and again over coming quarters.
Growth is the key to everything. Osborne, by some sleight of hand, has created the means to put away a store to bribe voters in 2014/15, if much of the work of reducing the deficit can be done by improving growth.
But he and Cameron have to survive for that long first. Cameron is enjoying his time as prime minister. Indeed, he has shown, unlike Taoiseach Brian Cowen, that there are benefits from looking as if one is enjoying going to work.
However, there are dangers. The Liberal Democrats are wounded after the tuition fees row. Nick Clegg frequently looks exhausted and overwhelmed by his role, with too few staff to wade through every piece of paper that flows into his office.
In a revealing insight, one of his sons drew a Christmas card that was sent out to thousands of party supporters which showed Daddy holding a mobile phone surrounded by the Christmas decorations. Out of the mouths of babes . . .
Clegg is said to have spoken to Mary Coughlan about life as deputy prime minister before he took up the job. He would have been better advised to have spoken to Dick Spring, who actually did operate in such a role during the rainbow coalition of the 1990s.
Mark Hennessy is London Editor