Economists were left confused tonight and unions critical about the plethora of public sector pay freezes and pension age announcements by the Conservatives and the government, but said neither party's proposals were close to what is needed to return public finances to health.
Government plans to freeze pay for 40,000 top civil servants and 700,000 other public sector workers were only seen to save £200m-300m a year – a drop in the ocean compared to the £175bn deficit the government expects to run in the current fiscal year.
George Osborne's promise to freeze the pay of 4 million public sector workers earning more than £18,000 a year would save an estimated £3.2bn a year from 2011.
Abolishing the national child trust fund for the rich, removing tax credits from families earning more than £50,000 and cutting bureaucracy are measures that would save £7bn a year by the end of the next parliament, the Conservatives say.
But Jonathan Loynes at Capital Economics was unimpressed. "This is small fry compared to the government's existing forecast that borrowing will still be close to £100bn a year at that point, a figure which could prove too optimistic," he said.
"It is clear much deeper spending cuts, probably involving huge cuts in public sector employment, will be needed."
Osborne also said the Tories were considering bringing forward raising the state pension age to 66 in 2016 for men and 2020 for women. The Conservatives pointed to estimates from the National Institute of Economic and Social Research (NIESR) that raising the age theoretically saves a hefty £13bn a year – equivalent to 1% of national income.
But NIESR said that calculation, to be valid, would require other changes, such as a raising of the age at which the minimum income guarantee kicks in.
But however small the savings might be from freezing public sector pay, trade unions were furious. "It cannot be right to single out public sector workers to pay the price of putting it right," said the TUC's general secretary Brendan Barber.
"Those who did so well out of the boom should now be asked to make their fair contribution through higher tax rates for the highest earners."
Derek Simpson, joint general secretary of Unite, criticised Osborne for plans he said had been written "on the back of a Bullingdon club membership card". "Osborne is a lightweight wielding a heavy axe aimed at hardworking families," he said.
The Royal College of Midwives warned a pay freeze could drive staff out of the profession. Jon Skewes, director of employment relations, said: "The birthrate has increased by over 20% and we have too few midwives. A pay freeze … may well cause existing midwives to leave."
Professor David Blanchflower, labour market expert and former member of the Bank of England's monetary policy committee, accused Osborne of having failed to understand one of the fundamental principals of economics.
"Cutting public spending in a recession is a really bad idea. I suspect Osborne will have to prepare for a spring, summer and especially winter of discontent in 2010 with widespread strikes in the public sector if the Tories get elected."
But Richard Lambert, director general of the CBI, said Osborne's speech showed a real sense of purpose. "He delivered a series of tough messages making it clear there are no easy choices. We still need to have a better understanding of his plans for public sector reform."
• This article was amended on Thursday 8 October 2009. We said the Tories were considering bringing forward raising the statutory retirement age: we should have said the state pension age. This has been corrected.
