As we blogged over the weekend, the noises off suggest that all that macho talk of 25% spending cuts was way off the mark.I hope to find time to verify the figures at some point, but I'd previously estimated that we'd need inflation of more than 2.9% per year to deliver real terms cuts, and that accords with the 13% over the course of the parliament that Tyler quotes. But perhaps the government is planning inflation far in excess of 13%. That Osborne has given the green light to further quantitative easing is certainly cause for concern.
We learned in June that George's cuts were never going to deliver more than a 4% overall reduction in real-terms spending over 5 years (ie a 9% increase in cash spend against 13% projected inflation). And although the ill-advised ringfence around the NHS and overseas aid budgets suggested that cuts in other departments might still be much higher, it now seems that even those cuts have been trimmed back. The big spending departments seem to have diverted any real pain into the welfare area.
Can that be right?
Sure, we know the difficulties. We know that even Mrs T never actually managed to cut overall spending - she only managed to restrain its growth.
But Mrs T was not wrestling with the kind of horrific government deficits and debt we currently face. Even in the annus horribilis of 1980-81, public sector net borrowing was only 4.8% of GDP, with public sector net debt a mere 46%. Compare her stroll in the park with our current predicament, where we have government borrowing over 10% of GDP, and debt already through 60% and rising fast.
In the circs, you have to wonder why we're not sticking with the original idea of 25% cuts. Surely after those huge budget increases under Brown, all departments must have a great wobbling midriff of blubber just crying out for emergency liposuction.
Tuesday, 19 October 2010
BOM: So What Happened To Those 25% Cuts?
Very little time for blogging at the moment, so here's something from Tyler at Burning our Money: