11 March 2013

Vince Cable and Liam Fox unite on need for NHS cuts

An unlikely political alliance is formed as both men argue that health spending should not be protected while other services are cut.

By George Eaton

Liam Fox might be one of the Tory supply-siders whom Vince Cable has accused of waging “jihad” against public services but could the pair be about to form an unlikely alliance? Both have today called for the government to cut spending on the NHS in order to free up funds for use elsewhere.

In a speech this morning at the Institute of Economic Affairs, Fox will call for George Osborne to end the ring-fencing of the NHS, schools and international development and to use the money saved to dramatically reduce taxes, including the temporary abolition of capital gains tax, and to limit cuts to areas such as defence.

Asked on the Today programme whether he agreed with Fox’s stance on ring-fencing, Cable said that while there was “an argument for protecting key priorities” such as the overseas aid and science budgets, ring-fencing was not “a very sensible” long-term approach. When pressed by John Humphrys, he notably refused to say that the government should continue to protect the NHS, implying that it could be targeted for cuts (one wonders if the Tories will take the chance to demonstrate their “commitment” to the health service by slapping him down).

With an eye to the current divisions over this summer’s Spending Review, Cable said: “The problem about ring-fencing as an overall approach to policy, is that when you have 80 per cent of all government spending that’s ring-fenced, it means all future pressures then come on things like the army, the police, local government, skills and universities, the rest that I’m responsible for. So you get a very unbalanced approach to public spending.”

It’s worth noting that the Business Secretary is a long-standing critic of ring-fencing. At the last general election, the Liberal Democrats, unlike the Conservatives, argued that no area of public spending should spared from cuts. As Cable told the 2010 Lib Dem spring conference, “There can be no ring-fencing if we are serious about getting the public finances back on track”.

For now, there is little prospect of George Osborne following Cable and Fox’s advice. Aware that no area of public spending is more popular with voters, Osborne and Cameron rightly believe that it would be politically toxic for the Tories to cut the NHS. In addition, the above-average rate of inflation in the health service means that there is a strong case for ensuring that its budget remains, at the very least, flat in real-terms. But as Osborne continues to struggle to extract cuts from the “National Union of Ministers”, the debate on ring-fencing is unlikely to go away.