Getting the UK on to a 'glide path'

In essence, the Lib Dems have spent their first day of conference sweating over an acronym - the fate of the next CSR, or comprehensive spending review. Which has come to be now a comprehensive cutting review.

It decides what public spending will be in the future, and this pending one will divvy up resources from April 2015 onwards.

We have seen the beginning of a debate about when we will learn about what cuts, and what public spending, we will see in the second half of this decade.

I revealed on Newsnight at the beginning of the summer that many Whitehall sources were contemplating the spending settlement of 2015 and were unable to see how the coalition partners could agree what their spending priorities would be without lashing themselves together for the next election.

For many senior players it was more or less a dead duck: what is the point of beavering away on a magnum opus - intricate-as-clock-work spending allocations for every crevice of government, a whole basket full of Faberge eggs - when it was unlikely to see the light of day?

Downed pens

Then the prime minister gave an interview to the Telegraph suggesting just as much - that it was very hard to see how he and the Lib Dems could agree joint spending totals beyond the next election.

Those Treasury civil servants still ploughing on, downed pens... But at the time Lib Dems were the sole voices of caution. That the CSR wasn't yet buried.

Well, this opening 24 hours at their conference appears at first glance to have seen that CSR ceremonially wounded if not killed.

David Laws and Danny Alexander yesterday, and now today Nick Clegg, have said that in April 2015 it is likely there will be an agreed spending pot for a year - as I reported was the likely outcome on Newsnight in July - to tide over councils and civil servant salaries, but probably no more.

No CSR lasting until 2018-19... An alphabet and numerical soup. Why does it matter? Well... it is fundamental. Through what you would spend, and what you would cut, you reveal what kind of party you are, ahead of the next election.

The chancellor is insisting that for him to reach his deficit reduction target by 2017, there must be £10bn further cuts to welfare to allow cuts elsewhere to remain at the same rate as we are experiencing right now.

Freezing

A fascinating IPPR piece of work we broadcast on Wednesday night's Newsnight suggested that if you do do these £10bn of welfare cuts, you can halve the level of cuts you have to visit on other spending areas like defence, the police and so on.

This is why, as revealed on Monday's Newsnight, they are eyeing the freezing of benefits for two years. As I said at the time, they are looking at, but are likely to dismiss freezing them all. Instead they have three options and the one most favoured brings in £2bn to £3bn, Treasury sources say.

Eagle-eyed sources point out that the Lib Dem leader in his Independent interview on Saturday did not rule out freezing any benefits, just freezing all. He focused on the more harsh option - one he will know isn't seriously up for consideration.

But, two things. Firstly, some kind of comprehensive spending review is possible. I understand that what could be struck is some kind of headline spending figures, which could be announced by the coalition partners ahead of the next election to last them until almost the eve of the election after that, 2020.

Senior coalition sources tell me that the two parties could agree a "glide path". So what the level of spending should be in 15-16, 16-17, 17-18 and 18-19 but that that would be all. They would then be free to disagree as to how you get to these targets - whether by Concorde, Hercules or a paraglider.

The virtue of this would be that Labour would have to accept the glide path, or be in a tight spot with the electorate - having to explain why their spending plans are affordable, and costed.

And that is why even though the Lib Dems in Brighton today are trashing the idea of finding a set £10bn figure, they are coming up with their own ways of finding some of it.

Wealth taxes

It is likely the Lib Dems would cut the welfare budget by means testing universal benefits for the elderly which would save them £1.5bn (that budget costs them £4bn but £2.5bn is very hard to see how to cut).

One of the shrewdest observers of this CSR endeavour, Gavin Kelly of the Resolution Foundation, has suggested the Lib Dems could hypothecate these savings to pay for the Dilnot proposal for social care - illustrating that while there may be potential for savings, there are also fresh outgoings on the horizon.

What of taxes on the wealthy, if not wealth taxes? The Lib Dems will return to their stalwart pledge to end tax relief for higher rate pensions.

It could bring in some £7-8bn. If they did that, plus some action on universal benefits for the elderly, you can see that they are within sight of Osborne's £10bn.

But today they have made very clear that they will winkle some kind of wealth tax out of the Tories (in exchange for giving ground on what they don't say).

Put aside Danny Alexander's tax-avoidance crusade, any wealth tax will have to be iconic and their myriad clamp downs on tax avoidance are too disparate to count.

The last Budget saw a higher rate of stamp duty - 7% - on expensive properties brought in. Because the wisdom of this is a battle already won with the Tories, my Lib Dem sources wonder whether they couldn't reach some agreement to go further on this ahead of the next election.

Trident

And what of higher bands of council tax? In the last year this has been discussed within government, but the reason they couldn't bring in another level of council tax to whack higher-end properties was because the last, current, coalition agreement said that there would not be a council tax revaluation.

Both parties will be freed of that pledge when they come towards the next election. Senior Lib Dems tell me it is not inconceivable they bring in new bands for truly whoppingly expensive homes... Despite their party being broadly against the principle of council tax (remember, they want to localise tax rates).

Communities Secretary Eric Pickles will wince at this: it means every council tax band being re-evaluated with the consequence that, erm, everyone's council tax will go up. Popular stuff.

Elsewhere, not replacing Trident would bring in some billions, meaning the defence budget can be cut a bit.

So... Lots of numbers... Lots of what ifs. But at root, decisions that will affect what kind of country we are living in for the next decade... And now the possibility of a glide path to get there.

Allegra Stratton, Political editor, Newsnight Article written by Allegra Stratton Allegra Stratton Political editor, BBC Newsnight

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