In Depth

Osborne's 'sham' spending review leaves Labour floundering

Clever politics by the chancellor leaves Labour's two Eds in a bind over spending cuts

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GEORGE OSBORNE'S sham spending review has achieved one aim - it has split Labour and left the two Eds, Miliband and Balls, in total disarray.

The Labour leader and his shadow chancellor look like a pair of motorists arguing about the map. But Miliband's new readiness to embrace austerity has upset Labour dissidents. Right on cue, former Labour cabinet minister Peter Hain and Neal Lawson of the pressure group Compass, have published a letter in the Guardian (also signed by a bunch of academics) warning that continuing austerity measures after the 2015 general election would be "politically and economically disastrous" for Labour.

This is all a great bonus for Osborne and David Cameron. Nick Robinson, the BBC Political Editor, said on the BBC's Today show this morning that one senior Tory minister had told him that it was all "a Baldrick-style 'cunning plan' to wrong-foot Labour". And it has worked.

Miliband announced on Saturday - to Labour consternation - that his party could not pretend  to the voters that it could reverse the cuts imposed by Osborne if it comes into power after the general election. His reason: the economy is in too parlous a state.

Then, on the Andrew Marr Show on Sunday, Balls insisted that Labour will reserve the right to borrow more in order to spend more on infrastructure projects to boost the economy. Technically these are not mutually exclusive statements but they succeeded in confusing commentators such as BBC presenter Carolyn Quinn on Westminster Hour last night.

George Parker of the Financial Times said on the BBC's Westminster Hour that Ed Miliband had been forced to accept austerity because Osborne had "won the argument" about fiscal discipline. Miliband is desperate to restore public confidence in Labour's economic competence after years trailing behind Osborne and Cameron on the economy in the opinion polls, despite the Tories' unpopular austerity measures.

Osborne hinted that after the general election, the richest pensioners could lose their pension perks such as free bus passes and the fuel allowance, and added a further hint that he could raise the pension age even higher than 67.

Osborne will sweeten the pill on Wednesday by announcing a raft of projects to boost the economy including HS2 - the high speed rail link from London to Birmingham - and the widening of major A roads such as the A14, which he knocked on the head when he came to power in 2010. This should have been hailed this morning as a U-turn by Osborne, but it wasn't because Osborne has convinced the commentariat that austerity has  made room in the economy for more spending.

The truth is that despite the fanfare, Osborne's great spending review for the financial year 2015-16 is for one month. It is to get the Coalition through April 2015 to the General Election which takes place in May. After the election, all the plans to be announced on Wednesday and Thursday by Danny Alexander, the Chief Secretary to the Treasury, are likely to be junked by the incoming government, whoever it is. It is a great sham - but you won't hear the two Eds saying so, because Osborne has won the argument.

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