Last week the chancellor in waiting, George Osborne made a speech to the Conservative party conference outlining his economic policy. The speech was well presented and wide ranging in terms of policy intent.

The overall theme of the speech was about cuts, cuts and cuts to public spending. He spoke about raising the pension age from 65 to 66 from 2016 in order to control the public debt and save £13bn [1]. Other policy intentions included freezing public sector wages and reducing benefits to the poor . He also reinforced his party’s regressive policy to raise the inheritance tax to £1 million in the next parliament as, “it cannot be a priority for our first budget” [2].

Under the current economic circumstances it is perfectly wise to cut public spending in order to control the ever increasing public debt. However, where the Tories fail is on the extent of their cuts coupled with consistent factual inaccuracies. Hence, they cannot be trusted.

David Blanchflower, an economist and former member of the Bank of England’s monetary policy committee, believes Osborne’s policies will send the British economy into a “death spiral of decline”. He argues, it is economic suicide to pull the plug on public spending in a recession since it leads to a depression, as it did in the US in the 1930s [3]. Moreover, the Conservatives believe the current economic mess is the sole responsibility of Gordon Brown and his government. For instance, David Cameron failed to mention the greedy bankers during his speech at last week’s conference. Coming back to Osborne’s speech, he incorrectly declared that the VAT was unsuccessful. However, researchers at the Institute for Fiscal Studies have found that the cut raised real consumption by 1.2 percent [4]. Finally, the most publicised and embarrassing mistake the Conservatives and namely, Osborne made was the £3bn shortfall in his plans for raising the state pension [5]. The National Institute of Economic and Social Research (NIESR) is the think tank that gave Osborne the basis for his claim. In contrast, NIESR counter acted the Tory claims stating “a simple advance of the retirement age … by one year in 2016 will not achieve this” [6].

1) http://www.guardian.co.uk/politics/2009/oct/09/george-osborne-budget-deficit

2) http://www.conservatives.com/News/Speeches/2009/10/George_Osborne_We_will_lead_the_economy_out_of_crisis.aspx

3) http://www.guardian.co.uk/commentisfree/2009/oct/09/cameron-osborne-recession-recovery-inflation

4) http://www.newstatesman.com/blogs/fourth-estate/2009/10/osborne-speech-tax-growth

5) http://www.newstatesman.com/blogs/fourth-estate/2009/10/osborne-speech-tax-growth

6) http://www.niesr.ac.uk/pubs/searchdetail.php?PublicationID=2406

Osborne's pension policy has staggering £3bn shortfall