He must have spent his exile in a re-education camp run by teachers, nurses and social workers, for it was a changed Mr Letwin who appeared before the rightwing Bow group yesterday. Unveiling the Tories' plans to curb the growth in public spending over the next six years, Mr Letwin pledged that the big three - health, education and social security spending - would be exempt from the corset he plans to throw around the rest of the public sector.
One of the few specific pledges was the freeze on recruitment in the core civil service announced last week. That would, Mr Letwin claims, reduce the running costs of government by £3.4bn by 2010 and cut 100,000 back office jobs in Whitehall. But there were few details of where the other cuts will fall.
An ICM poll for BBC TV's Newsnight showed that 55% of people disapprove of Mr Letwin's plans, with 39% supporting them. The survey asked 1,008 people what they would think if the Conservatives said they wanted to cut taxes at the same time as spending more on health and education by cutting public spending in other areas such as transport, roads, defence and local council funding. The poll also found more people trusted Labour on management of the economy than the Conservatives.
The Guardian spoke to a range of public spending experts to find out whether Mr Letwin's sums add up.
Reductions for housing and defence
Because the three areas the Tories' plan to ringfence from spending curbs account for more than half of government spending, the burden of the proposed slowdown will fall heavily on other government departments, according to Peter Robinson of the leftwing thinktank the Institute for Public Policy Research.
"This must imply quite heavy reductions in social services, housing, defence, transport and overseas aid," he said.
Mr Robinson pointed out that Labour was also planning to slow the growth in public spending outside its core priorities of health and education so it could close the public sector deficit. "The Conservatives' plans are not that different from the dilemma the government faces on how to slow down the rate of spending," he said.
Despite Mr Letwin's promise to slim down the state, the projections provided by the Conservatives yesterday showed a path for public spending not dramatically different from the government's.
By the end of its six-year diet under the Conservatives' medium-term expenditure strategy, government spending will still be absorbing 40% of national income - exactly where it stands now. Meanwhile, under a Labour government, the share is likely to stand at about 42% by 2008/9 - the chancellor has yet to announce the path of spending for the following years.
"We are arguing over two percentage points of GDP," said Mr Robinson. "It's hard to make a moral argument for why it's right for the state to absorb 40% of GDP, and not 42%."
Spending cuts
Mr Letwin's promise of spending cuts of £35bn are a "bit of a cheat", according to Mr Robinson. That figure represents the difference between spending 40% and 42% of GDP in 2010 - after six years' inflation. In today's terms, the figure is more like £22bn - not much more than the £15bn a year savings the government's own efficiency guru Sir Peter Gershon is proposing, according to a leaked report in yesterday's papers.
And the Conservatives' proposed two percentage point cut to the size of the state would only reverse around half the increase in public spending seen under Labour since 1999. "It is actually relatively modest compared to the fall in public spending which occurred early in Labour's term of office when they were sticking with plans they inherited from the Conservatives," said Robert Chote, director of the Institute for Fiscal Studies.
Curbing the growth of the public sector will be a challenge, said Christine Frayne from the IFS. Both Labour and the Conservatives hope to cut administrative waste.
Yesterday the Treasury was claiming Mr Letwin's call for a cash freeze on spending outside health, education and social security would result in real terms cuts of around £1.5bn on defence spending, £900m from the Home Office budget, and £250m on overseas aid.
But the real indication of how the debate on public spending has shifted in the seven years since Labour came to power was that the first two years of a Letwin chancellorship would be an easier ride for Whitehall's three biggest spending areas than were the first two years following Labour's 1997 victory, when Gordon Brown instituted a freeze across the whole of government. Those curbs enabled Mr Brown to insulate his party against charges from the Conservatives that they would preside over a return to the failed tax and spend policies of past Labour governments.
Lessons of the past
Madsen Pirie, the president of the Adam Smith Institute, one of the rightwing thinktanks which drafted Margaret Thatcher's call for a slimmed down state in the 1980s, said yesterday's speech was a similarly defining moment for the Conservatives. "Never again will the Conservatives be vulnerable to the charge that they will cut spending on schools," he said.
Mr Letwin was advocating a return to the Thatcherite strategy of slimming down the state by keeping the rate of increase in public sector spending below economic growth, he added.
Ruth Lea, from the Centre for Policy Studies, the thinktank founded by Mrs Thatcher and Keith Joseph, said the choice came down to which party voters believed was more credible in delivering savings outside the core services. "The Tories are much more likely to deliver these cuts than are Labour," she said. "The challenge is to show how you can deliver better services with fewer resources."
However Nick Herbert, director of the thinktank Reform, expressed disappointment that Mr Letwin had not been bolder. "Increasing spending on health and education without reform won't improve the public sector," he said. "We will simply repeat the cycle of failure unless a future government breaks the public sector monopoly in health and education by allowing new providers into the market."
