John McTernan: Cuts are cuts, no matter how you present them

WHAT is it about the Commonwealth? First Labour plumps for an Australian-style points-based immigration system. Then George Osborne promises a Canadian-style "star chamber" to oversee the cuts.

I suppose we can be grateful it's not an Indian-style civil service or a Nigerian-style oil industry we're being promised. More seriously, are there any lessons to be drawn from Canada for the current situation in the UK?

I spent some time in Washington last week speaking to senior Liberal advisers who were in the Canadian government at the time that their cuts were made. And this is one big difference: for all that Osborne pals around with the current Tory finance minister, the Canadian cuts were put through by a centre-left party. The Liberals, the party of Pierre Trudeau, the inventors of multiculturalism, were then led by Jean Chrtien, later one of Tony Blair's closest allies in the Progressive Governance Network. What I learnt from them was extremely interesting – and deeply concerning.

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First, they were clear that big savings came from the big budgets, and the biggest of all is welfare. They set about a fundamental reshaping of the welfare state, systematically means-testing all benefits.

The long run consequences have changed the bargain between state and citizen permanently. The read across to Britain is clear, though the implications are different. From Treasury briefings it seems that child benefit is being targeted. The glib argument is that women in middle-class households don't need the money. But this is a morass.

This money (previously family allowance) goes to mothers for a reason – few are the households where men and women share money equally; many are those where the mother's money is essential for the kids' wellbeing. And to claw it back essentially restores joint taxation.

The second obvious target is tax credits, with again the logic that middle-income houses don't need it. But even a cut-off set at 50,000 affects people down to incomes of just 30,000 a year, because of tapers, the system of gradually losing benefit if you earn more. This sounds technical, but the reality is that tax credits were the single biggest reason for women to vote Labour in the last election – in focus groups, swing voters were receiving them or knew someone whose life was transformed by them.

In contrast, Conservative hints are that pensioner benefits such as the winter fuel allowance and free bus travel will remain untouched. This opens interesting political territory, with the Tories protecting some of their core voters, but at the risk of leaving aspirational women (remember Worcester Woman?) to Labour.

Second, a lot of cuts were simply taken out of transfer payments to the constituent states of Canada. Little front-line service delivery was done by the federal government, so they transmitted pain down the line.

This is far from good news for Scotland. "Negative Barnett consequentials" (my favourite piece of Scotland Office jargon) will crunch through devolved services like health, education and local government. And capital cuts will give a new urgency to establishing exactly how many more years the existing Forth Road Bridge can actually last.

Again, this offers opportunities for Labour, if it is a canny opposition. And for once these are not against the Tories or the SNP, but instead the Scottish Liberal Democrats who will be the electoral frontline of the coalition. With Danny Alexander acting as Osborne's human shield, next year will see the SNP cutting, with Tory support, because of a budget settlement imposed by a Lib Dem Chief Secretary. Just one symbolic constituency gain for Labour in Aberdeen or Inverness will put Tavish Scott's feet to the fire.

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Third, Canada grew its way out of its deficit – which has been the case with almost every other country that came through this kind of fiscal crisis without a prolonged recession. How did it manage this? Nothing to do with the Canadian government; it was rescued by the huge engine of the US economy, which powered to growth under Bill Clinton's leadership, dragging Canada along in its wake. Our equivalent is the EU, which does not look as though it is going to burst into growth any time soon. The crisis in the southern eurozone, the German budget surplus, the vast difference between Sarkozy and Merkel on growing out of the recession – each on their own would hamper EU growth; taken together it is hard to be an optimist.

And what, I asked my Liberal colleagues, was the lasting political impact for your party? Well, they conceded, they got plaudits from the media and strong support from the public for having the courage to face up to hard choices and to make them. This lasted for about 18 months and then they started to get the blame.

Of course, there's a final element of the Canadian approach that George Osborne wants to adopt – involving the public in a great conversation. As someone who, as a councillor, took 30m out of a 100m local council budget in the late 1980s, I'll be betting that chat is not going to go well.

Put bluntly, voters elect politicians to make choices and they then reserve the right to attack the politicians for those very choices. There are all kinds of interesting and modern ways to involve people in deliberative decision making.

But pollsters who have worked with local councils to share real budget dilemmas and full financial information with voters tell of the real difficulty of involving citizens in the actual decision. One told me of an informed, articulate voter who, when faced with choosing between funding foster care and elder care, shouted: "You can't expect me to choose. You should do both. You make the cuts."

The real anger and confusion reflecting a conflict will be found in public meetings across the country if coalition ministers really try to get the public to share the pain. The most sardonic commentators at the moment are trade union leaders, wryly noting that though excluded from any mention in the coalition agreement, they are now essential partners in the cuts. Pretty soon, it's only the "star chamber" we'll be hearing about, not Canada.