Conservative Plan to Block National Insurance Rises: Details and Analysis

The Conservative Party, led by George Osborne, has outlined a plan to block most of the National Insurance (NICS) rises due in April 2012. The party claims to find the necessary funds to finance the tax cut through "efficiency savings" across Whitehall, amounting to £12 billion in 2010/11. The savings will be achieved by stopping big IT projects, renegotiating government supply contracts, outsourcing back-office processing, reducing spending on property, and not replacing public sector workers who quit. The savings plan has been sketched out by Sir Peter Gershon and Martin Read, both former government efficiency advisors.

Key Takeaways:

• The Conservative Party aims to block most of the NICS rises in April 2012 by finding £12 billion in efficiency savings across Whitehall in 2010/11.
• The savings will be achieved by stopping big IT projects, renegotiating government supply contracts, outsourcing back-office processing, reducing spending on property, and not replacing public sector workers who quit.
• Sir Peter Gershon and Martin Read, former government efficiency advisors, have sketched out the savings plan, but details of the government contracts and programs to be trimmed are not available due to vague statements.
• The Conservatives are "very confident" of realizing enough savings to fund the NICS cut, but there is a "cushion" in case the savings fall short.
• The proposed savings will come "on top of" Labour's promised £11 billion of efficiency savings in 2011/12, with the Conservatives asserting that there is no duplication between their plans and Labour's.
• The NICS cut is a permanent cut, and the efficiency savings being promised are also permanent, annual reductions in spending, according to the Conservatives.

Statistics:

• £12 billion: the total efficiency savings targeted by the Conservatives across Whitehall in 2010/11.
• £5.6 billion and £4 billion: the costs of the NICS cut in the first year and subsequent years, respectively.
• £11 billion: Labour's promised efficiency savings in 2011/12.
• £6 billion: the portion of the Conservative savings planned to be used to reduce the deficit in 2010/11.
• £4.8 billion: the average reduction in spending for departments whose budgets will be lowered due to the efficiency savings, a 2.8% reduction.
• £150 billion: the estimated amount that the Conservative government would borrow in the next fiscal year, according to Labour's projection.

Sources:

• "Osborne Blocks 93 Per Cent of National Insurance Rise" by George Osborne
• Interview with George Osborne's office
• Statement from Sir Peter Gershon and Martin Read