Nothing to fear?

DAVID CAMERON has no time to lose. Britain has a debt mountain to pay off and it is getting worse every day. The gap between Government spending and the tax take was about £163bn this year. On paper our deficit-to-GDP (gross domestic product) ratio is about as bad as Greece’s.

Thankfully, there are several reasons why Britain isn’t in the same mess as Greece.

Our taxation system is much more efficient so lenders have confidence that the Government can pay back the money it has borrowed.

Also the UK has taken its loans over a longer repayment period than most other European countries. So the incoming Government isn’t facing a looming multi-billion pound bill it cannot meet. But there are problems.

The UK has what’s known as a “structural”

deficit – which means, in simple terms, that we are spending more than we earn. Worse, we were over-reaching ourselves, even when our economy was operating at its peak. Since the recession, growth and investment have slumped but spending has accelerated.

There were good reasons for this. The stimulus helped prevent mass unemployment but the new Government has to turn the tap off at some point – and Mr Cameron plans to do it sooner rather than later.

Although the Tory leader ran a relatively smooth election campaign – unlike gaffe-prone Gordon Brown – he did slip up at least once when he described the level of public spending in the North-East as “unsustainable”.

Mr Cameron moved quickly to limit the damage, insisting the North had nothing to fear from a Conservative Government, but Professor David Byrne, director of postgraduate studies at Durham University’s school of applied social sciences, says deep cuts are unavoidable.

“The North-East has a high volume of public sector employment. Quite a bit of that is public sector employment that provides services for the UK as a whole – the contributions agency in Newcastle, child benefit in Washington and the teacher’s pensions in Darlington – and any cuts to their operations will have an immediate impact here.

“In addition, there’s certainly going to be cuts to local government – it’s just a matter of when and how deep.”

The region doesn’t have long to wait. Tax rises and spending cuts are likely to be addressed in the Queen’s Speech and the Budget Finance Bill.

Local authorities are already pleading their case for special treatment. Durham County Council leader Simon Henig voiced his fears that the new Government would be a disaster for the region He told council members: “I know Conservatives in the south of England are clamouring to re-adjust spending to take money out of deprived areas and re-distribute it to southern counties. Because of the special issues and the deprivation we face that we need the resources that are not needed in such large amounts by others.”

Prof Byrne says the North-East’s love affair with Labour has cost it influence: “Labour took our region for granted and felt it didn’t have to bother; the Tories thought they didn’t stand a cat in hell’s chance of winning a seat so they ignored us too.”

THE Budget, which is likely at the end of next month or early July, will prepare us all for the real pain to come. For all the talk of protecting front-line services reducing the deficit will be the main priority.

“It all depends on what’s classed as a frontline job,” says Prof Byrne. “In schools, a teacher’s job will be front-line but what about a teaching assistant?

“Similarly, the Government might not want to take on the police, but what about community support officers? They could become pretty thin on the ground.”

Local authorities may try to ameliorate the cuts by adopting non-replacement policies when staff leave – thereby avoiding mass redundancies – but that will inevitably impact on service delivery.

And what of One North East, the regional development agency (RDA)? David Cameron called RDAs “a complete mistake” and said he wanted to see their powers handed to local authorities.

Although no one would shed a tear for development agencies in the South, businesses here hold the North-East’s RDA in high regard.

Ian Swales, the new Lib-Dem MP for Redcar, believes One North East is safe. “When the Liberal Democrats nationally talked about getting rid of the RDAs we were very forceful in saying One North East does a good job for the area.

I think it still has a role to play.”

When he arrives for work this morning one of the many letters in Mr Cameron’s in-tray will be from Martyn Pellew, president of the North East Chamber of Commerce.

It says: “Enterprise levels in the North-East have improved in recent years. However, business levels remain significantly below many other regions. In these circumstances it is crucial that targeted support for new and growing businesses remains in place.

“A uniform national approach would fail to see this untapped potential fulfilled in the North-East.”

And then there’s the thorny topic of public service pensions. Earlier this year the Confederation of British Industry warned that goldplated public service pensions would undermine the Government’s finances for decades unless they were curbed.

About five million of the UK’s 6.1 million public sector workers are enrolled in pension schemes that pay a retirement income equivalent to two-thirds of their last pay cheque after 40 years’ service. The number of private sector workers in similar schemes has slumped from 4.5 million at the beginning of the decade to fewer than two million.

And impending job cuts will make this worse, according to Prof Byrne: “If you cut public sector jobs, there are fewer employees contributing to the pensions pot. It’s a huge headache for them.”

So will the Con-Lib coalition go the distance?

Will the Lib-Dems stomach being whipped on deep public spending cuts, a cap on immigration and a replacement for the Trident submarine fleet?

One Labour wag remarked last night: “It won’t last. The Lib Dems are like a bunch of vegetarians who’ve just ordered a Big Mac and large fries. When they wake up they won’t like what they’ve got.”

But Ian Swales believes there’s a commitment to making the coalition work on both sides: “I think we have a good understanding of each other already and I’m delighted so much of our manifesto has been carried over.

“When you’re a minority party it’s easy to give MPs more freedom, but we understand our responsibilities. I think we have shown excellent discipline in the past and there’s a deep, deep commitment to making sure it lasts.”

One thing is for certain – by the time MPs leave the Commons for their summer recess in a couple of months the General Election of 2010 will seem like a lifetime ago.