George Osborne's tax cut: questions, questions… and answers?

George Osborne has set out details of his plan to block most of the National Insurance rises due next April.

In brief summary, the Conservatives said they will raise the money to fund the tax cut by finding "efficiency savings" across Whitehall.

The savings will come from: stopping big IT projects; renegotiate existing Government supply contracts; "outsourcing back office processing"; reduce spending on property; not replacing "back office" public sector workers who quit.

The savings plan has been sketched out for the Conservatives by Sir Peter Gershon and Martin Read, both former Government efficiency advisors.

The savings will be made in 2010/11 and be worth £12 billion, Mr Osborne said.

Around half of that sum will be found in the Department of Health and the Department for International Development — where the Conservatives have promised to increase spending — and the Ministry of Defence.

Those three departments will be allowed to keep any money they save from greater efficiency, Mr Osborne said, meaning their budgets for 2010/11 will be unchanged from those set by Labour.

The other £6 billion of efficiencies will be found in other departments, whose budgets will therefore be an average of 2.8 per cent lower than Labour's plans in 2010/11

In 2010/11, Chancellor Osborne would use that £6 billion to reduce the deficit. (Labour has said it will borrow £163 billion in 2010/11. Add today's savings to the £7bn oc cuts Mr Osborne announced last year and presumably a Tory Treasury would borrow £150 billion in the next fiscal year.)

In 2011/12, the £6 billion would fund the cut in NICS.

That's the Conservative plan as I understand it.

Now, I'm probably being a bit dim, but there are still some things that confuse me here.

UPDATE: a nice man from George Osborne's office has just called with some responses. I've added my summary of those answers below each question.

i)
Just how did Sir Peter and Dr Read come to a figure of £12 billion of savings? We have only 4 A4 pages of vague statements from the two; Mr Osborne and his team admit they haven't seen the detail of the Government contracts they intend to rewrite or any of the other details of the programmes they are promising to trim. Is there a more detailed Gershon-Read blueprint for savings in existence? If Yes, why isn't it being published? If No, how much credibility does the £12 billion figure have?

Response: No, there's no secret blueprint. What there is, Mr Osborne's people say, is the "wealth of experience and expertise" held by Sir Peter and Dr Read. That's not something to be sniffed at, they say. So if they say it's £12 billion, we should accept that.

ii)
What happens if the Conservative savings fall short of £12 billion? It's hardly unprecedented. The first Gershon Review for the Government claimed more than £13 billion of savings. But the National Audit Office said that barely a quarter of that total was actually delivered. So it's surely possible that the new Conservative savings target won't be hit. If the savings fall short, will the NICS cut still go ahead? Or is it conditional on those savings?

Response: Tories are "very confident" of realising enough savings to fund the cut. However, they point out that the first year of the cut is costed (by the IFS) at £5.6 billion, falling to £4 billion. So there's a "cushion" there in case not all £6 billion is delivered.

iii)
Last week, Labour promised £11 billion of efficiency savings of their own in 2011/12, on the basis of a group of a bunch of remarkably vague press releases. Mr Osborne said that his savings will come "on top of" the Labour savings. His team said the Tories have "banked" the Labour savings in their plans.
So is Mr Osborne really promising that he will be able to save £11 billion on the basis of Labour's press releases? And given that we don't know quite what's involved in Labour's savings, how can the Conservatives be confident there is no duplication between their plans and Labour's?

Response: Conservatives insist that, having inspected those vague press releases, Labour has no plans relating to contract renegotiation, staff vacancies etc. So no, no duplication. They say that the Labour plans are indeed vague and "empty"; so how can the Tories bank the £11 billion savings? Well, that comes in 2011, the period of the next CSR. Only when there's a Tory government in office to inspect the CSR data will the party be able to make proper judgements on the £11 billion and the overall level of public spending.

iv)
The NICS cut is a permanent cut, and will cost at least £4 billion a year, every year. So are the "efficiency savings" being promised also permanent, annual reductions in spending? Mr Osborne and his team say Yes. But the statements from Sir Peter and Dr Read refer only to savings "in 2011/12." Why don't the efficiency gurus point out that these are permanent savings?

Response:: Nope, Conservatives adamant that these are permanent annual savings. They say that once a contract price is lowered, it stays lowered. And some of their efficiencies will actually grow in value: savings from unfilled vacancies will increase through labuor turnover, for instance.