From the TUC

If it hurts like a cut, it is a cut!

19 May 2010, by in Economics

We are now five days away from the first really signficant economic announcement of the new government. On Monday, we will be given more details of the £6bn spending cuts for 2010-11, which were previously opposed by the Lib Dems as a threat to economic growth, but which will now be introduced by their Chief Secretary to the Treasury, David Laws.

Yes, next Monday politics will get serious. A small taste of what is to come could be found in yesterday’s story in ‘The Times’ which argued that £759m to support the UK’s car and nuclear sectors could be under threat. A nervous-sounding Treasury source played down that prospect, but whether this particular cut materialises or not, there will be frayed nerves and chewed fingernails aplenty in 1 Parliament Street next week.

David Laws will have welcomed the comments of Bank Governor Mervyn King, who appears to have endorsed plans to cut the deficit early. Interestingly, however, other news reports suggest that these cuts will be based, in part, on plans identified in Labour’s Budget in March and in the Pre Budget Report last November. A Treasury source quoted in the Guardian said: “If you are going to look at waste, you are, by definition, going to look at similar areas around waste, around procurement and around IT.”

So far, so good. Nobody would object to saving money from reducing waste, better procurement or improved IT contracts. So why am I nervous? Well, one reason is that I don’t buy the same Treasury source’s argument that “The previous government identified a whole bunch of waste. It just wasn’t doing anything about it”. Why would any government, mindful of the huge pressures on the public finances, not push ahead with eliminating waste early if to do so was so pain-free?

The answer, I suspect, is that it won’t be pain-free. I’m fascinated that cuts to discretionary spending, such as consultancy and travel costs, savings in IT, cost reductions from major government suppliers and “significant reductions to the cost of quangos” (in George Osborne’s words) will be imposed on all departments except health, defence and international development. Does this mean there is no waste in health, defence and international development spending, but there is waste in all other areas of government spending?

Of course it doesn’t. But the Government cannot apply these cuts to ring fenced departments, because when they take effect, the public will see what they really are. They are cuts. Not efficiencies. Cuts. From next Monday, the public will start to feel the pain. And then, the Lib Con honeymoon really will be over.

One Response to If it hurts like a cut, it is a cut!

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