Osborne and Cameron had yet to announce if they were prepared to make cuts if they won the general election, because they were fully aware of the damage it could do to the Tories if they became known as the party of cuts. But for much of the first half of 2009, they goaded and taunted Brown and Darling into saying whether Labour would introduce cuts (known as the ‘c’ word). In his April Budget, Darling announced that income tax for top earners would rise again to 50%, and that borrowing would rise to £175 billion in the next two years.16 But on cuts, not a word.
On 10 June, shadow Health Secretary Andrew Lansley went on Radio 4’s Today programme and admitted that, if the Conservatives were elected, 10% cuts might be necessary to all departments except Health, International Development, and Education. Fatally, he omitted to mention that the Conservatives would just be matching what a leak suggested Labour would itself be doing.
‘That’s it! We can beat them on this,’ a jubilant Brown yelled out to his team in Downing Street when he heard what Lansley had uttered. At last he thought he’d found a clear Labour agenda for the future, a ‘eureka’ moment. Brown thundered across the despatch box at PMQs later that day: ‘This is the day when [the Conservatives] showed that the choice is between investment under Labour and massive cuts under the Conservative Party.’ Brown claimed that ‘wide, deep and immediate’ Tory cuts of 10% would be introduced ‘in order to fund a £200,000 tax cut for the 3,000 richest families’, a reference to the inheritance-tax reform Osborne had unveiled to wide acclaim at the Conservative annual conference in 2007.17 Brown’s team were deeply torn about the honesty of this claim, as well as the gulf opening up with his increasingly disillusioned chancellor, whom the Conservatives thought Brown had appointed as a mouthpiece, only to discover he had appointed a heavyweight with a mind of his own.18 His discovery further fuelled Brown’s desire to replace the independent-thinking Darling with his right-hand man and protégé, Ed Balls.
Cameron and Osborne went into a tight enclave to debate how to respond to Brown’s latest attack. The outlet they selected was an article in The Times under Osborne’s name, to appear on 15 June. In the first draft, Harrison had avoided using the word ‘cuts’, but Osborne insisted the dreaded ‘c’ word must be mentioned, rewriting the piece himself.19 Rather than avoiding the language of ‘austerity’, as Tories had in the past, Osborne wanted to come out into the open and say the plan really was for ‘cuts’. ‘We have fought shy of using the “c” word – cuts,’ he wrote. ‘We’ve all been tip-toeing around one of those discredited Gordon Brown dividing lines for too long. The real dividing line is not “cuts vs investment”, but “honesty vs dishonesty”.’ The reference to honesty was a calculated tactic to undermine Brown, whose integrity was being called into question, and by implication Labour’s.20 ‘We should have the confidence to tell the public the truth that Britain faces a debt crisis; that existing plans show that real spending will have to be cut, whoever is elected,’ wrote Osborne in The Times.21 In September, a leak from the Treasury suggested that a future Labour government would itself make spending cuts of 10%.
Plan A’s third and final plank was put into place in the autumn of 2009 with the announcement where the cuts might actually fall. For several weeks, working in the shadow chancellor’s Parliament offices, Harrison, Hancock, Kirby and Philip Hammond (the shadow chief secretary) had been reviewing the spending options for a future Conservative government and where any cuts could take place. Their thinking was fed through to Osborne and Letwin, and then up to Cameron himself. The media, sensing they had both main parties on the run, brought immense pressure to bear on them during the summer and early autumn to be specific about cuts. Brown admitted at the TUC annual conference on 15 September that there might have to be some cuts, but failed to mention them in his party conference speech two weeks later, with the gulf between the realism of his chancellor and the obduracy of the prime minister becoming more and more apparent. Darling had become very much in tune with his officials at the Treasury. For the ten years 1997–2007, Brown had ruled the roost with these same officials, and he was furious.
Osborne was determined to craft an economic message to the 2009 party conference in the autumn that would stand up to any challenges, and show that he was serious about taking the necessary risks. The public, as well as the media, had to be shown that he meant business. The Conservatives enjoyed a strong poll lead in the summer of 2009, and he believed that lead would be challenged all the way through to the general election in 2010 unless he set out his stall very firmly. Nick Robinson, the BBC’s wily political editor, got under his skin more than anyone, needling him to be precise about the Conservative plans.
Final decisions on the conference speech were taken only in September, and Osborne’s voice proved decisive. His team came up with a package of cuts aimed to save £23 billion over the life of the next parliament. The key elements were public sector pay to be frozen, the state pension age to rise, and the cost of Whitehall to be cut by a third over the life of the parliament.22 To ensure the proposals were seen to be fair, Osborne memorably later said ‘we could not even think of abolishing the 50p rate on the rich while at the same time we are asking many of our public sector workers to accept a pay freeze to protect their jobs’.23 Cameron and Osborne had adopted a high-risk strategy. ‘We threw away the rulebook and came up with all sorts of measures that you’d never normally advertise in advance of a general election,’ recalls Osborne.24
In the speech in Manchester, Osborne announced that the Conservatives would deal with the bulk of the deficit over the life of the parliament. Mervyn King had already suggested this timeframe: Osborne deliberately used it, without King’s knowledge, as it seemed sensible to align the Conservatives with the Bank’s thinking. He committed the Conservatives to ‘in year’ cuts in 2010, and laid out structural reforms that autumn to abolish the Financial Services Authority, to have more supervision of banks, which led to the setting up of the Prudential Regulation Authority in the Bank of England, the establishment of the Financial Policy Committee (also in the Bank of England), and to take all regulation into a new body, which was to be the Financial Conduct Authority. As he walked off the stage at the end of the speech, Osborne was reported as telling aides, ‘Now let’s see if I’ve cost us the election.’25 Ever the risk-taker, he relished the daring he had shown and the headlines which spoke of his decisiveness. Martin Kettle writing in the Guardian called the speech ‘smart, well delivered and in some respects really quite brave’.26 The Telegraph leader writers praised his ‘hard-headed realism’.27
Plan A was thus virtually all in place by Christmas 2009, five months before the general election, crafted in these three separate stages. The high command appeared united on the economic message, the party seemed content, large parts of the commentariat were won over. But at this point, the status quo became unbalanced. Hilton, who had come back from a sojourn in California, was not pleased. ‘What the fuck is all this focus just on cuts and negativity? It’ll cost us the election,’ he said. He eyeballed Cameron and told him that the narrative around the ‘Big Society’ and modernisation that the party had built up over the previous four years would be jeopardised unless the message of the long election campaign beginning in January 2010 wasn’t more positive. He argued forcefully to shift the focus from spending, which he thought a media-imposed narrative, and he was dyspeptic about the influence of communications director Andy Coulson. Coulson in return