David Cameron´s mixed message

01.04.10 Publication:

Business endorsement for their NI cut is handy, but will not solve the Tories´ credibility gap with voters over ´efficiency savings´

No one is going to vote on the basis of a 1% rise, or cut, in National Insurance contributions (NICs). Credibility and fairness are the basic economic issues voters care about, surely – along, of course, with a general hope for a better future. For that reason, the businessmen´s letter in the Telegraph is a mixed blessing for George Osborne and the Tories. It will help his rather threadbare credibility, but whether it will help on fairness is more of an open question.

The Tories are quite right to attack Alistair Darling´s increase in NICs. It is rather incredible that a Labour chancellor should raise the principal tax on employment for middle-income groups just when the economy is still struggling to emerge from its long recession. The truth, of course, is that he thought it was a stealth tax: few would notice it, and so it would cause a lot less fuss than a straight rise in income tax.

But for George Osborne to claim he is going to pay for his reversal of the NICs rise through “efficiency savings” is risible.

He was asking for trouble by making that claim, and in the Channel Four debate on Monday, Darling and Vince Cable were quite right to mock him on that point. Even if he were correct – and there is no guarantee that he is, since most new governments simply replace one lot of waste and inefficiency with a dollop of their own – the timing would do him no good. Reversing the NIC rise would cost the Treasury money immediately, whereas efficiency savings could not, even in the best of circumstances, raise much money for at least 12 months, possibly longer.

Having a slate of top businessmen support you cannot be bad, since they do employ a lot of people and do hold part of the economy´s future in their hands. But it carries two risks.

The first is the same as when a slate of economists wrote letters backing Tory policy on the budget deficit: it could well be that another group of business leaders might be drummed up by the ever-creative Lord Mandelson to say the opposite. The other, though, is that business leaders, with their far-from-middling-incomes, are not exactly popular right now. OK, they weren´t bankers. But if David Cameron and George Osborne want (as they should) to stand for the whole nation, rather than just the rich or the powerful, then this blurs that message.